Looking Forward (continuation)January 26, 2015
The economy seems to be good and getting better. Equipment and technology is continuing to change. Some of the change is in the name of government regulation and some in the name of increasing efficiency and safety.
Supply and Demand. The economy is good for truckers. 2014 saw the first truck shortage in many, many years. We couldn’t haul all the freight we had and had to turn a lot back for lack of seated trucks. This should continue and will become worse. There is a severe driver shortage in the industry which is projected to grow. Older drivers are retiring, young people are not joining the business and freight continues to increase as the economy improves. Everyone struggles with this. The problem will not be getting enough freight. The problem will be finding enough good drivers to haul that freight. All trucking companies are struggling with this at the moment.
There is some good news for truckers in this. We are all, trucking companies and drivers acutely subject to the laws of supply and demand. This means that when trucks are in short supply compared to freight, we can raise our mileage rates. When we can raise our mileage rates, we can raise our drivers’ mileage rates. This occurred throughout 2014 and I anticipate it will continue in 2015. It is a two edged sword. We want more drivers. But we don’t want our competition to get more drivers. If everyone could get the drivers they wanted, the number of seated trucks would grow and in time there would be more trucks than freight and rates would go down. I don’t see that happening again in this industry until the next recession. The morale of the story is.…expect good things, help us recruit good drivers.
Fuel. To misquote Inspector Clouseau of the Pink Panther series “It’s the fuel, you fuel!” Low fuel is good for trucking, high fuel is bad. Pretty simple rule. The measure of diesel price is heating oil. It’s the lowest now in many years and the winter is not yet over. I expect the price with fluctuate throughout 2015 but remain low compared to what we have been used to. This means everyone will make more money, especially if you use our discounts which have been at historic highs. Many contractors with good mpg are actually making money now off our fuel surcharge pay. 2015 will be a good year for fuel, our largest expense.
Trailers. We’ll add a couple hundred more trailers. Our trailer fleet is rapidly becoming brand new. New is good… they have inflation monitoring systems and skirts. Great for mpg!
Trucks. We’ll continue to add trucks. We think the manufactures are figuring out these exhaust systems a little better now. Newer trucks mean less maintenance and less downtime. They also mean better fuel economy. We have decided to make our fleet younger. Our plan is to sell and replace trucks prior to 450,000 miles.
We are experimenting with some auto shifts. Many drivers hate to get into them and after two weeks declare that they will never go back to manual transmissions. We’ll continue to test a few more. A Volvo salesman told me 60% of Volvo’s builds are now automatic transmissions. The other OEM’s are seeing more on their new builds as well. Hence an increasing number of new trucks are now automatic. I see this as a trend. In a few years, I’ll bet manual transmissions are the exception rather than the rule.
New trucks will make a dinging sound if you don’t use your seatbelt. Buckle Up! It is the law and we sure want to prevent injuries.
Technology. Gosh, there is so much new technology coming on the market that it makes your head spin. New technology will continue to be an increasing part of what we do. Much of it will represent change but will make truckers more efficient, more profitable and safer. We saw this a few years ago with E-logs, even though the FMCSA has yet to mandate then. Many hated them at first but now can’t imagine being without them. I predict event recorders will go the same route. There is a lot of chatter in the industry about event recorders and many good carriers will implement them to protect themselves and their drivers while improving safety.
These are a few of my predictions formed from being in this a while and talking with a lot of folks in the industry. You may not like them all but on the whole I think we are looking at a very good year in 2015.
Happy and Safe Trucking! Tom