KAG Leadership Q&A
The Perfect Storm – The Serious Challenge of the National Driver Shortage
By Kenan Advantage Group
February 17, 2017
The healthy economy has resulted in a very tight labor market. That’s made it more difficult to find employees in many industries. Nowhere is that problem greater than in trucking. This month, Bruce Blaise, President & CEO, talks about this situation and how KAG is dealing with it.
Q: You call the current driver situation the “perfect storm”. What do you mean by that?
A: In the movie The Perfect Storm, a small fishing boat confronted three, separate weather fronts that collided to create the fiercest storm in modern history. That’s where we are with drivers today, but our storm has been caused by two factors: increased demand for drivers combined with a reduced supply.
Right now, the economy is doing very well. That’s created increased demand for employees in just about every industry. That strong economy has pushed unemployment below 4 percent, the lowest it’s been in nearly 20 years. That means there’s a very small pool of potential new employees to draw from. Demand for drivers is far outstripping the supply.
This isn’t a new problem. I looked back at some past issues of this newsletter and saw articles in 2011 where Dennis Nash, KAG’s Executive Chairman, was talking about the driver shortage. We saw this coming and have been working on solutions since then.
Q: Can you give us some numbers to help understand the problem?
A: Absolutely. You don’t have to look very hard to hear or read about the overall labor situation, and specifically the shortage of drivers. I just read that the estimated shortage of drivers is around 60,000 today, and that number will double in just five years. Those additional drivers are needed not only to fill the increased demand, but also to backfill for drivers we will be losing. About 20 percent of current drivers will retire in the next five years, and 45 percent will leave the industry within the next 10 years. Those numbers are alarming.
So even if the economy were to slow and demand for more drivers reduced, we would still be faced with a shortage due to the shrinking supply. It’s a simple matter of demographics working against us.
Q: What’s the outlook for recruiting younger drivers?
A: Not good. Right now, the percentage of drivers 35 years and younger is a measly 6 percent. That’s not many. The average age of a truck driver is 50, but the average age of all American workers is 42. We have an older workforce.
Unfortunately, much of the younger talent is being siphoned off to other industries and occupations that they see as more attractive. In the last five years, construction added about 1.5 million jobs. Manufacturing added 200,000 jobs and is continuing to ramp up hiring. It’s like a land grab out there, except it’s a talent grab. We see ads everywhere announcing job fairs where companies hope to hire hundreds of new employees. The signs on stores that usually promote sales or special offers are more likely to have messages like “WE ARE HIRING!” I’ve never seen anything like it.
Q: What are you doing to recruit more drivers?
A: We are part of an industry-wide effort to change the perception of driving as a career option, both for younger drivers and for people who are under-represented in our industry, including women and minorities. Women make up nearly 50 percent of the workforce, but only 6 percent of the trucking industry.
There are definitely challenges involved with a career behind the wheel, but it can be a very rewarding career. Like many transportation companies, we are looking for ways to make the job more attractive in order to encourage more people to think about joining us. We have taken a strategic, long-term approach to these recruiting efforts and continue to refine and improve them as the economy and employment situation change.
We are accelerating our efforts to not only bring on new, qualified drivers but also to keep the good drivers who are already part of our team. A big part of that is pay. As an industry and as a company, we haven’t done enough to ensure that drivers are fairly compensated. We are trying to lead our part of the industry, the bulk industry, to get pay where it needs to be.
One of the traditional, negative aspects of driver pay is variability. Depending on a carrier’s needs, drivers might not be called in, resulting in unpredictable income. That’s a big problem. Our solution is a broader-based guaranteed pay so drivers know they will have a steady income. We are trying to ensure a consistent base pay that drivers and their families can count on.
Q: What else are you doing to make driving more attractive?
A: Last year we started a program that gives our drivers a better line of sight to the long-term benefits of a career with us. We lay out what they can expect in terms of pay and benefits over the course of their career so they know they have something worth working toward.
While pay is important, it’s far from the only aspect of our efforts to get and keep drivers. We have several teams at work on ways to improve the experience of being a driver with us. That includes a better onboarding process. We assign a mentor to each new driver to help them adapt to our company. New drivers have a 30-, 60- and 90-day check-in with their manager to ensure they are on track and to answer any questions the new employees might have.
We are giving our terminal managers the information and skills to support them in doing a better job of training and retaining their drivers. We have a program that recognizes managers who do well in these areas and have a referral program open to all employees that provides a cash reward when they identify a candidate who goes on to become a driver.
Q: What role do your customers play in overcoming the driver shortage?
A: Our customers have a huge stake in this problem and they can play a huge role in solving it.
Trucking is a low-margin business. All of the things I described above that we’re doing cost money. It would be impossible for us to just absorb these costs and continue to operate. Customers must expect to support these programs by realizing and accepting the fact that there will be increased costs. I’m not asking for a blank check, just pricing that reflects the actual cost of doing business.
In a recent Bloomberg article, “The U.S. Is Running Out of Truckers,” the author warned that the potential cost of moving goods by truck could resemble “…surge pricing on a grand scale: The risk is that it becomes like trying to hail a car from a ride-sharing service after midnight on New Year’s Eve.” That’s a bit overstated, but he makes a good point.
From an operations side, we need to look at driver time as a limited resource that we should avoid wasting. Our systems do a tremendous job of optimizing loads and deliveries, but customers can do things at their end to ensure they don’t waste driver time. We’ve had situations where drivers sat for hours and hours waiting for their load. If customers can help reduce driver turnaround time, that adds capacity to the whole system.
We can help customers with ideas for some process improvement, things like preloading so the driver has a very quick turnaround. Our customers should also think about ways to optimize driver time through more efficient loads. If we could increase payloads by 5 percent, that would be significant.
Q: Those efforts are focused on more-efficient deliveries. How about the customers’ role in the bigger issue of reducing the driver shortage?
A: Customers can also help us there. One of the things that makes it difficult to attract new, and especially young, recruits to the driving profession is that most people don’t consider it an attractive occupation. That’s changing, but it needs to change faster and in some visible ways.
Too often, our drivers are treated like second-class citizens. I heard about a driver at a customer site who asked to use a restroom. He was directed to a shabby Porta-Potty in the parking lot. I hope customers will treat drivers with the respect and dignity they deserve.
Think about the fact that they operate a piece of equipment that costs a quarter of a million dollars and are responsible for safely navigating it on public highways. These people are transportation professionals who are critical to your success and ours. We should treat them accordingly. As we show them the respect they deserve and do other things to make driving a more-attractive career, our shortage problem will begin to ease.
Q: How would you gauge customer awareness of the driver shortage and what needs to be done to solve the problem?
A: I think many of the people we deal with directly get the picture, but beyond them… not as much. It would be very helpful if the people who are directly involved with the transportation function could share this information with their leadership and with their customers.
I know the people we deal with are typically under pressure to drive down costs. That is almost always a valuable goal to pursue, but in a market facing extreme shortages, it is difficult and often counterproductive. You can almost always find someone able to offer a lower price per load, but the reliability and quality of that delivery will be questionable.
If we can help you or your leadership group by providing more information about the shortage and how to ensure it won’t cause problems for your company, let us know. We would be glad to meet with you and give you the facts. I’ve made a number of presentations recently to customer and industry groups to help them better understand the shortage situation. Someone from KAG would be glad to do the same for you.
Q: How are you feeling about KAG’s ability to cope with the driver shortage?
A: I’m confident we will have all the drivers we need to fulfill our commitments to customers, but it is going to take a team effort. I described all of the things we are doing to hire and keep drivers. Those things are happening now. We will continue to improve and expand them in the future. We are counting on our customers to play their part. We need them to support our programs, find ways to improve their efficiencies and treat our drivers with respect.
All indications are that the shortage will get worse before it gets better. If we all pull together, we can successfully manage the shortage and ensure success for our customers and for KAG.