Despite a host of other critical disruptions, attendant problems from the Ukrainian war, and other issues compounding problems, the trucking industry still delivered vital goods unevenly during the ongoing pandemic. And truckers were expected to keep up their schedules despite lingering concerns with capacity issues in shipping, lack of coordination between sectors, and ongoing labor shortages. So, it's not clear sailing yet with the US supply chain.
There is, however, a bright spot in the news about the issues with our national supply chain issues. And that is because supply chain problems and lower fuel prices appear less threatening as they begin to normalize from the peaks of the pandemic. As a result, some businesses already feel reduced pressure from inflation and other related issues.
Unfortunately, Supply Chain Issues Are Not Over Yet
While the modest gains are creeping into forecasters' perspectives, including Bloomberg Economics and the Federal Reserve Bank of New York, the gradual transition from the pandemic-driven supply problems appears to be replaced by another potential headache. That is a backward slide in consumer demand, which can reverse economic growth, thus yielding excess inventory problems.
According to some economists, undesirable consumer trends are applying the brakes to further monetary recovery due to slowing global consumer demand for goods. In particular, they see the decreasing demand for discretionary consumables as a possible signal of rising risks that can lead to a worldwide recession.
The Trucking Industry's Biggest Challenge Adds to Supply Chain Woes
Trucking companies are having trouble hiring qualified drivers. Many drivers are frustrated about how little money they make. Some brokers are causing problems by posting too many loads. Many factors are causing the shortage of truckers. There are more trucks than drivers, and truck driving jobs require a lot of training. The third problem is that trucking companies cut back on their fleets because they exceeded capacity during contraction.
The lack of coordination between supply chain stakeholders has led to an increase in freight costs. And it gets worse when you consider that the trucking industry is one of the most regulated industries in the country. There is also a lack of trust among different parties involved in the supply chain. For example, shippers don't always pay motor carriers accurately and don't always pay on time, and sometimes truckers get stuck with unwarranted cargo.
Problems with a Driver Shortage and Persistent Recruitment of New Truckers
The trucking industry is facing a severe shortage of qualified drivers. According to the American Trucking Association (ATA), there are currently 1.5 million truck drivers in the United States; however, ATA estimates that 2.1 million truck drivers will be needed by 2023.
These conditions mean the trucking industry needs to hire approximately 250,000 new drivers yearly to keep up with current levels. But, it doesn't stop there because it requires an additional 500,000 drivers are needed to meet future demand beyond those necessary to keep existing jobs filled. For this reason, the trucking industry has deep concerns about the driver shortage. It's a prominent issue because the industry relies heavily on experienced drivers. In fact, according to the ATA, nearly 90 percent of all truck drivers have been working for at least five years.
But, this is just part of the problem. The other challenge is that the industry struggles to find qualified drivers who want to work for them. Most trucking companies offer low wages and long hours. They also expect their employees to drive for 12 hours straight without stopping. These conditions cause many people to leave the industry. Unfortunately, the trucking industry has a too lax attitude toward safety. Truck drivers often blame others for the mishaps when accidents happen, which can cause lawsuits against those individuals.
Supply Chain Logistics and Insurance
Problems with the US and global supply chain and the logistics required to coordinate them are ever-present. A significant concern is that the shipping process is slow and inefficient, which increases the cost of transporting goods. Another problem is that the transportation system is fragmented and thus makes it difficult to track shipments from origin to destination.
Some carriers charge high rates but provide poor service. Others say they receive good service but pay high rates, but the truth is that no motor carrier offers perfect service.
The insurance industry's response to the supply chain issues is to create more coverage options. For example, "Shipper liability" insurance covers the shipper if a shipment goes missing or is damaged during transit. Other policies cover the carrier if a shipment is lost or damaged while transported.
Another option is to offer "carrier liability" insurance. This policy protects the carrier if a shipment arrives late or is damaged, while another option provides "freight loss insurance." This policy helps the shipper recover costs associated with the lost or damaged payload.
In addition, the insurance industry offers several types of cargo insurance. Some policies protect the shipper if a package gets stolen or damaged during delivery. Others help the shipper recover costs if a package is delayed due to weather or traffic congestion. Still, others support the shipper to recover losses if a package is delivered to the wrong address.
In summary, the supply chain issues facing the trucking industry are numerous. Many of these problems stem from the fragmentation of the transportation system. As a result, the trucking industry must deal with multiple layers of bureaucracy to carry shipments, and the insurance industry is also responding to changing market conditions.
Trucking and Supply Chain Insurance Intersect
Complications, risks, and opportunities abound where trucking and supply chain intersect. Both require specialized knowledge and experience to operate. And both industries rely on each other to complete their operations.
The trucking industry relies heavily on the freight forwarding services provided by the supply chain management (SCM) industry. Likewise, SCM depends on the trucking industry to move its products around the country. As such, there is a symbiotic relationship between the two sectors, which means that one cannot function properly without the other. Therefore, each side needs to understand how the other operates.
Education and Cooperation Are Essential for Profitable Operations
Education helps both sides work better with the other. The following information details the components of the trucking and supply chain industries and explains how the two sides interact with the best ways to educate each other.
Trucking Industry Components
The trucking industry has three main components: drivers, fleets, and terminals. Drivers haul loads from place to place, fleets own the vehicles used to transport shipments, and terminals store and distribute the freight.
- Drivers. A driver transports a load from point A to point B. For example, he may deliver the cargo to his customer's facility, pick up a new shipment at a terminal, or drop off a load at a warehouse.
- Fleets. A fleet owns the vehicle used to transport a load. It typically includes a tractor-trailer rig, a trailer, and all necessary equipment.
- Terminals. A terminal stores and distributes freight. It usually consists of a large building containing storage space, loading docks, and offices.
Supply Chain Management Industry Components
The SCM industry has four main components: brokers, carriers, logistics managers, and warehouses. Brokers seek to match buyers and sellers while motor carriers provide transportation services. Logistics managers coordinate the activities of the different parties involved in moving freight, and the cargo is stored and distributed from the warehouses.
- Brokers. A broker matches buyers and sellers. He helps them find the best deals on shipping costs, time, and distance.
- Carriers. A carrier provides transportation services. These include transporting cargo from one location to another.
- Logistics Managers. A logistics manager coordinates the different participants' activities in moving freight.
- Warehouses. A warehouse stores and distributes freight, including inventory items.
How the Trucking and Supply Chains Interact
There are several ways that the trucking and supply chains work together. For example, when a shipment leaves a terminal, it goes to a warehouse. From there, it travels to a broker who finds the best deal on shipping costs, time and distance. The broker then contacts a carrier who picks up the shipment and delivers it to the destination specified by the buyer.
Another way that the two sides interact is through the brokerage process. When a broker receives an order for a shipment, he must first determine whether he can fulfill the request. If not, he will contact a carrier who can. Then, once the motor carrier agrees to move the goods, the broker arranges for their delivery.
In addition to these interactions, the trucking and supply-chain industries have many more connections. For instance, a broker might receive an order for a shipment from a manufacturer.
That manufacturer might need to ship a part to a distributor, and the distributor might need to ship to a retailer. Meanwhile, the retailer might want to purchase some products from a wholesaler. All of these activities take place on the same day. Finding methods to streamline these processes will benefit everyone, from manufacturers, shippers, truckers, and consumers.
Trucking and Supply Chain Insurers Need Cooperation to Mitigate Risks
Areas of mutual concern include:
- Driver shortage.
- Fuel price volatility.
- Safety issues.
- Losses.
- Cargo damage.
- Delays.
- Theft.
- Damage.
- Weather conditions.
How to Find Supply Chain Insurance Resources
At Program Business, we work with both sides of the market daily to help agents find and connect with specialty brokers, MGAs, and program administrators. Seeing their different struggles in linking up was a significant motivation for us to develop the ProgramBusiness.com Market Directory.
A directory search for manufacturing and distribution coverage finds Amwins Underwriting with its specialized team of underwriters who are experts at finding solutions for hard-to-place risks. In addition, they excel at locating manufacturing and distribution insurance solutions to protect multiple steps within the supply chain.