Competition Heats Up in the Trucking Industry

Amanda CallahanFreight Trucking, General, Shipping Guide1 Comment

The trucking industry is currently marked by high levels of competition as each player tries to position themselves as the best service provider in terms of efficiency, effectiveness, and value for money. Niches and sub-niches are developing within the sector with a view to increasing the competitive advantages of each individual player. The steady growth of the US industry is also having an impact as it fuels increased exports of manufactured goods and imports from countries like China. One of the consequences of this situation is the fact that the capacity for long-haul services is tight.

Ultimately it becomes a seller’s market, with the attendant increases in the costs of moving goods from one place to another. The companies that are able to successfully reconcile their competitive advantages with the need to provide appropriate services to their customers will be the winners in this. That is not even stating the issue of trade wars that are likely to appear in some form or the other following the moves by the Trump Administration to control the country’s trade deficits.

Knight-Swift Buys Trucker Abilene Motor Express

Few examples demonstrate these dynamics in the trucking industry better than the recent acquisition of Abilene Motor Express by Knight-Swift. It is a classic example of individual players within the industry positioning themselves for the top spot by any means possible including mergers and acquisitions.

The business markers for this particular transaction are impressive:

  1. A massive total business holding which includes 400 trucks from Abilene
  2. Increases in the Knight-Swift revenue account to the tune of an estimated $100 million
  3. The creation of a strong player or stronger player within an already fragmented market

That is not to say that it is all going to be happy in paradise. First of all, there will have to be significant operational changes that are designed to amalgamate such a large holding with an already substantial trucking company. Of course, there are advantages in peering into Abilene’s market but that will require a clever reconfiguration of the working systems that Knight-Swift has been used to.

The markets seem excited about this acquisition. However, there is the usual speculation about the motives and effects of the move. This is not just a quirky bit of news for the industry hacks, but rather a significant change in the market that could impact other players within the trucking industry. What is fairly certain is that Knight-Swift is in a much stronger position than before acquired Abilene.

Truck Driver Shortage

Meanwhile, there are certain systemic issues that continue to plague the trucking industry. Indeed, some have speculated that the acquisition of Abilene was directly related to these challenges.

Here is a rundown of the issues that are keeping industry bosses busy at the moment:

  1. Driver Shortage: The basic premise of this industry is that if there are no workers then nothing moves. By 2015, the industry was facing a driver shortage that was estimated as high as 45,000 personnel. It seems that even in this new optimist America, there are few people that are qualified and willing to drive trucks. Currently, there is a shortage of 50,000 drivers which represents about 70% of all the freight tonnage that covers USA highways.
  2. Volatile Freight Volumes: The trucking industry is a slave to the whims of nations and consumers. For example, in 2016 there was a slackening of freight volumes which led to the problem of over-capacity. However, the upside to such changes is that it releases some of the pressure on personnel. A case in point is how the shortage of truck drivers fell to 36,000 in 2016 (a drop of over 10,000 personnel when compared to the previous year).
  3. International Trade Shocks: Many industry experts are anxiously waiting out the full impact of the systematic moves by the US Trump Administration to reduce imports and increase exports. Specifically, there is a nudging fear that China might retaliate in kind. Although a full-out trade war is unlikely at this stage, it is nevertheless a concern for the trucking industry, which relies on international trade for its business.

Demographics for Truckers

As the industry plans for the coming 20 years, it must pay attention to the underlying problems that are presenting challenges for it today. One of those challenges is demographics. It is estimated that the median age of an over-the-road (OTR) truck driver in the USA is about 49 years. That is on the wrong side of middle age. That age is even higher than the average age of the American worker (which is 42). In twenty years’ time, many of these people will be retiring. There is no evidence that millennials have an appetite for trucking as a career.

Part of the problem is the significant regulations that are required in order to make trucking safe and sustainable. For example, nobody is allowed to drive a truck before they are 21 years of age. By that age, the vast majority of millennials have already settled into some sort of career path. The industry has failed to take advantage of the gender dividend. Only 6% of truckers are female, a very poor showing when compared to the 47% of the American workforce that are women.

Laws and Regulations

Although the Trump Administration has promised to address the issue, crippling regulations remain a key feature of the trucking industry.

These may cover many issues including:

  1. Minimum working age
  2. Hours schedule
  3. Minimum wages
  4. ELD requirements

Unfortunately, many of these regulations target the driver as an individual rather than their employer as a corporation. That means that many are leaving the industry.

Key Issues for the Industry

In order to survive, the trucking industry will need to address these critical needs and issues:

  1. The trucking lifestyle must become more women-friendly.
  2. Millennials should be enticed to join the industry before it is too late.
  3. The industry should be part of the conversation about international trade.
  4. Industry players like Knight-Swift need to continue coming up with imaginative ways to overcome some of the systemic market challenges of the industry.
  5. The industry should embrace modern technology in order to achieve efficiency and a competitive advantage over other forms of transportation.  

The trucking industry has survived many crises and many changes. There is nothing to suggest that the current challenges facing the industry are going to break it. On the contrary, it seems that major industry players such as Knight-Swift are taking advantage of the opportunities that come their way. Any industry player that wishes to be successful must always focus on ensuring that they provide the best available service to their customers.

Amanda Callahan

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