Last Updated: Tue, March 5, 2019
At what point is the American public going to stand up and take notice of the truck driver shortage?
According to spokespeople for the retail industry, that time is right about now.
Faced with higher shipping rates because truck companies are passing on increased costs to their freight customers many companies prominent in the retail and fast-food industry are passing those higher fees right on to consumers.
According to recent news from Material Handling & Logistics, these companies, many of which are household names, like Proctor & Gamble, Hasbro, and McDonald's are raising prices, focusing on productivity improvements, seeking alternative shipping or looking into opening new distribution centers to try to close the distance gap in the distribution chain.
Procter & Gamble, maker of many ubiquitous household items like Tide detergent, Bounty paper towels, Crest toothpaste and Pampers diapers, is feeling the pinch from a 25-percent increase in shipping costs, and raised prices last year on some products. They say it is too early to announce prices for 2019.
TJX's HomeGoods furniture is opening more distribution centers in the United States, while Hasbro is opening a new hub in Joliet, Illinois, due to an increase in shipping costs in 2018.
MacDonald's franchisees are at the mercy of company headquarters for setting prices on their menu items, but the company is facing increased shipping rates by its distributor, Martin-Brower, that ships to more than 12,000 restaurants in the United States. Fans of MacDonald's fast food can expect to see an increase in prices.
Even online ecommerce giant Amazon says freight costs consistently outpace online sales growth. Prime customers have already felt the pinch by experiencing a 20-percent Prime membership fee to $120 last year, the first increase since 2014.
Rail might be an alternative shipping solution for some in the industry, but it won't be for everybody. Bloomberg Intelligence analyst Lee Klaskow said rising rates are even spreading to rail. And rail is not as flexible as shipping by truck directly from point to point.
This problem of increasing prices to consumers is in large part the flip side of what the trucking industry considers a solution for the ongoing shortage of drivers – to increase pay and to offer better (and more costly) working conditions.
The lack of drivers prevents trucking companies from adding capacity to their fleets in order to meet the increase demand for shipping. The end result is that because of increased wages, and not enough equipment to move freight, carriers are raising shipping prices. It's the law of supply and demand.
Klaskow sees this as a no-win situation, however. He told MH&L that pay bumps haven't alleviated the driver shortage, that autonomous trucks are still in the future and even lowering the interstate driving age to 18 won't help much.
According to a recent Consumer Affairs article the government's Producer Price Index reports that transportation and warehousing costs have gone up 6.8 percent in the past 12 months. Not all that increase can be attributed to trucking costs, but shipping rates are a significant factor.
The article stated further that driver pay and perks will continue to increase for the foreseeable future, according to American Trucking Association Chief Economist Bob Costello.
On the positive side, Brittany Weissman, an Edward Jones analyst, told Bloomberg that companies are in a better position to deal with freight cost issues now that when the problem first surfaced. “Last year, the higher transportation costs caught a number of companies off guard versus this year, they were expected,” she said. “Plus, many companies have the benefit of price increases to help offset input cost like higher transportation cost.”
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