- The trucking industry in the U.S., challenges and measures
- How crucial will be the role of technology?
The American economy relies heavily on trucks and employs around 3.5 million professional drivers to move c. 10.5 billion tons of goods every year. This includes goods for import-export as well as for transportation locally. Additionally, online shopping is at an all-time high, thereby, increasing the requirement for a number of fulfilment and supply chain hubs.
The trucking industry is experiencing a rapid growth due to the expansion of the U.S. economy, particularly in the past few years. According to the American Trucking Association (ATA), the trucking industry alone accounted for c. 70.6% of the freight movement in the country and generated $676 billion in revenues in 2016. Likewise, in 2017, the volumes were expected to reach 10.7 billion tons and $719 billion in revenues. The ATA anticipates that the U.S. trucking industry will expand by 3.4% per year until 2023 and by 40% by 2045. This is in line with the evolution and expansion of the U.S. economy.
Although the industry is experiencing a growth, it continues to face the capacity crunch. This is due to the shortage of drivers in the industry for more than 15 years now. While this shortage was around 45,000 in 2015, it fell to 36,500 when freight volumes softened in 2016. The dearth of drivers was at its peak in 2017 with a shortage of 50,700 handlers (the highest level recorded) owing to an increase in demand for industry freight volumes in the same year. One of the key factors that attributed to the shortage was a relatively higher than average age (49-52 years) of existing truck drivers with unwilling millennials opting not to take up the available openings. Additionally, the sector is unattractive to other segments of the population and due to this women drivers account for a mere 6% of the total workforce. The existing fleet also suffers from a paucity of qualified drivers, this renders them incapable of employment and hence, amplify the effects for truck carriers. Significantly, if left unabated the shortage could peak to exorbitant levels as shown in the below graph.
The trucking industry continues to struggle for fresh recruits as the lifestyle of truckers is unconventional. Often drivers are on roads for extended periods, this causes fatigue and several suffer from undiagnosed sleep apnea (a sleeping disorder).
There are around 4,000 deaths and 10,000 injuries related to trucks every year in the U.S. Thus, in order to minimise these casualties, the Trump administration implemented a new safety regulation (Dec. 2017) that requires commercial truck drivers to use an electronic logging device (ELD) to record their hours of service (HOS). Hence, with an increase in demand, the ELD mandate could further tighten the existing trucking capacity as drivers will cover fewer miles per day. The HOS requirements directly revolve around the ELD implementation and vice-versa.
Moreover, during the course of the recession, the freight transportation demand declined and thus, allowed the industry to fulfil its obligations even with fewer drivers. DAT Solutions estimated (online freight marketplace) that in the beginning of 2018 only one truck was available for every 12 loads shipped. This was the lowest ratio since hurricane Katrina hit the U.S. (2005).
Furthermore, diesel is another cause of worry for the industry. In the U.S., a significant portion of the oil-related demand arises from the medium and heavy-duty vehicles. ATA, for instance, reported that in 2015 the trucking industry consumed c. 54.3 billion gallons of diesel and gasoline. This costed motor carriers c. $142.9 billion alone in the same year.
In order to accommodate the growing demand from the U.S. highways and to minimise the fuel price shock both for the industry as well as the broader U.S. economy, innovation is a necessity for the sector. There are a variety of newer technologies with an ability to reduce the trucking sector’s oil consumption as well as lessen manpower requirements. These range from near-term physical variations that can enhance vehicle’s aerodynamics to long-term automated trucking vehicles. Albeit, technology cannot provide immediate relief, the industry is definitely heading towards a major transformation.
There have been efforts by a spectrum of companies such as Daimler, Navistar to start-ups such as Waymo (erstwhile Google’s self-driving project) and Uber’s Otto, all are enthusiastically pursuing what is believed to be the future of the trucking industry. Their combined vision includes transformation in vehicle designs, autonomous driving technology (ADS), electric powertrains, platooning, connected vehicles and wireless connectivity to name a few. A vision which is presently being jointly shared by Tesla. Addedly, proponents of vehicle safety view this as an opportunity to spark a downward trend on fatalities both in the commercial transportation sector and on the highways in general. These technologies will likely bring down the dependence on drivers as well the cost associated with hiring these operators, which is quite similar to most service industries in form of labour. Likewise, c. 43% of trucking OPEX per mile is attributable to driver compensation, which is the largest operational cost for motor carriers. Hence, automated driving will save money by optimizing acceleration, braking and platooning. Further, improved safety will also reduce insurance premiums. Morgan Stanley projected that the potential labour and fuel savings by autonomous trucks will be $168 billion per year. The savings breakdown was c. $70 billion for labour, c. $35 billion for fuel efficiency, c. $27 billion in productivity savings and c. $36 billion in miscellaneous reclaims.
In the next few decades, the advent of automated trucks is expected to completely transform the way freight is transported on American highways. This will be due to a combination of new and innovative technologies. Trucks will move on the instructions of a wealthy pool of informative transport infrastructure and other vehicles, thereby, improving utilisation through remote maintenance, boosting safety and enhancing efficiency. Ultimately, these trucks will be self-driven and hence, free up handlers to undertake administrative tasks and would eventually do away with drivers. These advancements will transform the entire logistics supply chain system. Trucks will become more tightly integrated into the supply chain with the arrival of shipments to factories/warehouses and end customers and all this will be timed precisely. Thus, all stakeholders involved in the supply chain would gain transparent access to the information regarding whereabouts of their goods, estimated time of arrival and load information to their next stop. The warehouse system would then automatically assign a truck to a loading dock along with numerous autonomous forklifts ready in line for unloading. This will move the load on the other portion of a warehouse, where it will be sorted by a machine for local delivery routes and loaded onto smaller autonomous electric trucks for final delivery. The development of a completely autonomous truck is anticipated and will be delivered in stages as complete elimination of a driver may be witnessed in the near future. It is, however, safe to assume that within the next couple of decades drivers would not be required in long-haul trucks, but will continue to man trucks entering urban areas. This will be identical to local pilots boarding large ships as these enter a harbour.
It is strongly believed that technology, including few of the advances that are currently unrealised, will revolutionise this vital industry to a great extent, make it more efficient, safer and in the process create a newer experience for tomorrow's drivers. Although, it is yet to be seen what sort of regulations will be formed for this industry. However, there is no denying the fact that the future of this industry will be shaped by digitization.