If your grocery bill starts trending higher, the problem can be traced to the nation’s highways, not the aisles of your local store. A looming transportation crisis threatens to drive up prices on millions of goods that Americans buy every day.
Shipping costs are accelerating rapidly, beyond the capacity of major food and consumer products manufacturers to absorb. Of the 25 largest consumer packaged goods companies, 18 say rising transportation costs have already or may lead to higher prices.
{mosads}With e-commerce growing and the economy expanding, demand for trucks to move the nation’s goods is soaring. Yet manufacturers can’t produce vehicles fast enough and currently face an order backlog of more than 200,000 trucks.
Even if we get more trucks on the road, we must have available drivers to operate them. There has been some debate over whether the driver shortage is a myth; however, the conversation has missed a critical point — higher shipping costs are very real, and we aren’t solving some essential capacity issues.
Unemployment is low, creating a tight labor market across industries — trucking is no exception. With a turnover rate hovering around 90 percent, competition for truck drivers is intense. The National Transportation Institute reported an average pay hike of 10 percent last year. Coupled with aggressive signing bonuses to recruit and retain drivers, the costs were passed on to shippers, like CPG companies.
It is not a temporary issue. While unemployment may fluctuate, the average age of a truck driver is 49, and retirements alone ensure the market will remain tight. In fact, retirements and increased shipping demand are why the American Trucking Association estimates that the United States will need to hire nearly 900,000 new drivers over the next decade. Yet the Bureau of Labor Statistics estimates that only 108,000 drivers will be hired in the next decade.
As it stands now, there’s only one truck available for every 12 loads that need to be shipped. When demand outstrips supply, costs rise — and transportation is no exception.
Spot prices for shipping set a record last year, while costs for refrigerated trucks hit 40-year highs. One of America’s largest manufacturers of consumer goods predicts trucking expenses could rise 25 percent this year, even on top of last year’s inflated levels. Another major company estimates these price increases will translate into $250 million in additional freight costs, which will eventually trickle down to consumers.
This issue is not going away unless we tackle the biggest problems contributing to the transportation capacity squeeze: bad regulatory policy and deteriorating infrastructure.
{mossecondads}Today’s driver age restrictions are simply illogical. In 48 states, drivers with the appropriate safety training can obtain a commercial license at age 18. But under federal law these truckers can’t cross state lines with their payloads until they are 21. That means younger truckers can drive the 250-mile haul to Danville, Va., from Arlington, Va., but can’t make a delivery two miles across a bridge into Washington, D.C. This restriction combined with a rapidly aging workforce ensures a transportation crisis would be long-lasting.
To address this issue, the Department of Transportation recently launched a pilot program that would let America’s military veterans and reservists who are trained drivers take their skills into the commercial marketplace. It’s an innovative way to help members of the military transition into civilian life while creating a new talent pipeline of prospective commercial truck drivers.
Of course, America’s deteriorating infrastructure is a perennial problem that also has a huge impact on shipping costs and consumer prices.
Our highways, bridges and tunnels form the backbone of America’s entire transportation supply chain. Yet the American Transportation Research Institute found that congestion on our roadways costs 1.2 billion hours in lost productivity annually — the equivalent of 425,533 truck drivers sitting idle for an entire year.
It’s become almost a cliché to bemoan our nation’s crumbling infrastructure, but the cost to the U.S. economy continues to mount. A few years back, the American Society of Civil Engineers estimated America would lose nearly $4 trillion in GDP and 2.5 million jobs by 2025 without major investments in infrastructure. We’re well on our way toward realizing those losses.
Whether it’s driver shortage or infrastructure, none of these issues are new. What is new is their potential to hit hardworking Americans’ pocketbooks. It’s time to move beyond debate and act, before today’s problem becomes tomorrow’s crisis.
Geoff Freeman is president and CEO of the Grocery Manufacturers Association (@GroceryMakers).