The world of freight transportation is changing rapidly.  The signs are there and they are unmistakable.  Recognizing and responding effectively to these signals may help determine which shippers and carriers will survive in the years ahead.  Let’s examine the components of the new paradigm of freight transportation.

The Era is Cheap Oil is Over

The steep escalation in fuel prices this year is a harbinger of things to come for shippers and carriers.  This time there will likely be no major recession to bring energy prices down.  The sad fact is that 95 percent of transportation modes, passenger and freight, run on petroleum products and the likelihood of finding new sources of supply or of shrinkage in global demand is highly unlikely. In fact the use of petroleum in countries such as China and India is on the rise.

The result will be tighter truck capacity, greater use of intermodal rail services, the electrification of transportation systems, the relocation of factories and distribution centres and the slow shift to cleaner, cheaper fuels.  It will drive more LCV’s (long combination vehicles) or “turnpikes” and more triple trailer configurations.  This may be the impetus to harmonize our laws throughout North America to remove barriers to the movement of the most energy efficient vehicle combinations across our highways.   To curb use, many countries will have to begin looking at the Danish example of higher taxes on fuel inefficient vehicles and higher taxes on petroleum.  Get used to it.

The Driver Shortage is Real

The driver workforce in North America is aging.  The “route 66” lifestyle of the long haul truck driver no longer appeals to most people.  Like everyone else, truck drivers want to be home with their families most nights of the week.  After all these years, driving truck is not a certified recognized profession.  The compensation for truck drivers (e.g. $40,000 to $50,000) is not great.  The relentless push for freight cost reductions makes it difficult for trucking companies to raise driver wages and remain competitive.  There is no “quick fix” and the problem will get worse before it gets better.  Like the energy problem, the solution to this problem will take time.

Driver compensation and as a result, freight rates will have to increase.  Immigration policies will have to change to bring more foreign existing and potential drivers to North America.  Driver training programs will have to improve to expedite the process of providing the new pool of drivers with the required skill sets to perform as professional drivers.  Shippers will have to look at their supply chains and seek out cheaper modes (e.g. rail intermodal) and more local sources of supply.  The time to plan for driver shortages is now.