In this discussion with Robert Bowman of Supplychainbrain, Anshu Prasad (co-founder and chief executive officer of Leaf Logistics) explains why the freight business is caught in an endless cycle of boom and bust.
The cycles are “a fundamental problem,” Prasad says. When demand is high, truckers rush into the market, with drivers purchasing shiny new units. In the surge caused by the pandemic, more than 100,000 new trucking companies registered for business, he notes. That was followed by tens of thousands of bankruptcies. More than 144,000 trucking company registrations were declassified in the last 12 months.
“None of us is really winning” from the system, Prasad says, adding that drivers haven’t gotten a real raise “in economic terms” since the 1970s. “They get higher rates,” he says, “but they don’t make more money. Profitability in the industry is still low, and 500,000 competitors all compete to drive prices down.”
There’s a significant gap between the wages of fleet drivers and independent owner-operators. A trucker working full-time for Walmart, for example, might see a posted salary of $110,000, while a for-hire driver is likely to make half that.
One problem that continues to plague the freight industry is the large number of empty miles, both for headhauls and backhauls. A trucker that can string together multiple loads without running empty makes for a more reliable provider for shippers. “But at the end of the day,” Prasad says, we’re all paying a one-to-a-small-handful game in a many-to-many problem.”
Load matching, and a consequent reduction in empty miles, depends on the ability to plan well in advance. Trucks aren’t taxicabs, Prasad notes. Still, one-third to one-half of truck miles are currently running empty, with drivers spending up to four hours waiting at the dock to load and unload. A reduction in dwell time would go a long way toward eliminating the nationwide driver shortage, he says.
4PL aggregators, like Active, improve the efficiency of these markets by reducing 'empty miles'.
Source: Supplychainbrain
Comments