Trade Compliance

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State of Logistics: Slow Growth, Capacity Challenges Could Result in Higher Truck Rates

Posted June 25, 2014

The Council of Supply Chain Management Professionals (CSCMP) last week released its annual State of Logistics Report. Compiled by business analyst Rosalyn Wilson with additional commentary by a panel of industry leaders, the report is widely used by supply chain management professionals and organizations to benchmark activity within the U.S. logistics environment.
Logistics Globe
According to the report’s findings, U.S. business logistics costs rose 2.3 percent in 2013, a significant drop from the 3.4 percent rise in 2012. Business logistics costs increased to $1.39 trillion, up $31 billion from 2012. In 2013, logistics costs as a percent of the nominal GDP declined to 8.2 percent meaning that the freight logistics sector was growing at a slightly slower rate than GDP.

Freight volume in tonnage terms rose in 2013 more than the number of shipments and revenue figures suggest, but rates remained “stubbornly flat” which left the trucking industry, in particular, in a weaker position in 2013. Rising costs for drivers, equipment and maintenance have pushed marginal trucking companies over the edge, as the number of bankruptcies rose last year.

Trucking capacity is becoming a “more severe” issue for shippers, the report says. The truck driver shortage is the “No. 1 concern for trucking executives,” who are coping with higher costs for drivers as well as compliance with tougher government regulations regarding hours of service and other driver standards.

Last year’s report had suggested that the shortage of qualified drivers, now believed to stand at about 30,000, could swell to nearly four times that by 2016. The trucking industry is struggling to hire and retain younger drivers to replace those who retire, quit, or die. It has been estimated that only about 17 percent of the current driver population is under 35.

Capacity reduction in trucking likely means higher rates for shippers. Wilson predicts carriers should be able to “significantly” raise truck rates this year, “probably in the 5 to 8 percent range.”