What the Latest Spending Numbers Reveal About the State of the Freight Industry
The U.S. Bank Freight Payment Index recently published a report chronicling the spending trends in the terrestrial freight industry. The study recorded 1.4 percent gains in both spending and shipments in the first quarter of 2018 from the end of 2017. This increase marks the industry’s fifth consecutive quarterly rise regarding shipments and the highest-ever first quarter status in spending.
“Both indices are significantly higher than for the same quarter last year, reflecting the stronger economy over the course of the 12 months. However, spending gains far outpaced shipping expansion, reflecting driver shortages that become more acute and put upward pressure on rates as demand grows. Compared with the first quarter of 2017, the shipment index jumped 12.6 percent, but the spend index surge was nearly double that — 24.5 percent.”
Carriers are having a challenging time finding willing and qualified drivers. Consequently, fleets cannot grow without people to operate them. The American Trucking Association mentions how, to incentivize new drivers, shipping companies are increasing pay: truckers working irregular and national routes earned an average of $53,000 in 2017, which is a 15 percent rise from 2013. However, 2017 still saw a shortage of 50,000 drivers, and the ATA predicts that this number could become as much as 175,000 in 2026.
Trucking is arguably the American economy’s cornerstone, so demand is only growing, but the supply-behind-the-supply is lagging behind. With a lack of drivers, manufacturers and retailers often have to delay nonessential shipments or pay higher prices to ensure punctual deliveries. Freight professional Dave Menzel tells the Wall Street Journal that the cost to shiploads between 500 and 750 miles skyrocketed by 30 percent on some routes. With rising prices, it’s not impossible for the effects of these fees to find their ways to consumers.
A logistical nightmare
The freight industry suffers in other ways, too. Brokers are incentivized to schedule as many routes as possible, irrespective of practicality, which means vehicles drive almost 30 billion miles every year empty or partially full. This practice is especially frustrating with the driver shortage; if drivers are not operating at full capacity, it wastes both theirs and shippers’ time. To keep up with demand, the US will need to hire at least 900,000 new drivers within the next ten years, so none of our current ones have any time to spare.
Decades ago, trains were much easier to keep track of because railroads are fixed, but there are approximately 15.5 million trucks in operation today in the US alone (2 million of them are tractor trailers). Managing this extreme number of vehicles is already daunting enough, but when straining to meet growing demand, the logistics side of trucking spent over $700 billion in 2016. If the industry could embrace decentralization, it could save a significant amount of money (and gas, too — capturing just half of current underutilized capacity would reduce freight truck emissions by 100 million tons per year).
How we can change the freight industry’s status
Business Wire also mentions that U.S. Bank Freight Payment processed $24 billion in worldwide freight payments in 2017. Thanks to its online collaborative solution, “organizations can streamline and automate their freight audit and payment processes while obtaining the business intelligence needed to maintain a competitive supply chain.” The company unites logistics, transportation, and supply chain expertise to provide security for its affected users. We at Fr8 Network, however, want to take this even further.
With our blockchain-based platform, shippers, carriers, and brokers alike will be able to access information many of them never could before: locations, dates, schedules, load sizes, reputations, payments, prices, and more. With blockchain technology’s transparency, actors can make well-informed pragmatic decisions, reducing the likelihood of empty routes. When industry professionals can schedule with one another directly (while encouraging honesty and satisfactory performances), we can optimize the industry’s efficiency.
We cannot make new drivers, but many of them quit within a year of starting because of the arduous and unpredictable lifestyle. We hope that by smoothing over operations and bringing some clarity to existing practices, we can recruit some fresh talent and assure them of the necessary place trucking plays in the United States’ economy.
Trucking is struggling with its existing methods. With our blockchain solution, we believe that we can remedy many of the industry’s shortcomings to make shipping, production, and purchasing more manageable for everyone.
