This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
The lion’s share of IMC Companies’ fleet is contracted. We have over 2,000 drivers from coast to coast. Our shippers want reliable service and, in turn, committed assets and drivers against their book of business. Consistency for drivers is important, and contracted freight is a winner for both parties. We do reserve a smaller segment of our business for spot cargo, and that business, of course, follows the principles of supply and demand.
While most trucking companies felt softer volumes last quarter, we must brace ourselves for an environment that continues to pile on costs. This is the lowest unemployment we’ve seen in my lifetime. In 2018, drivers received well-deserved pay increases that were necessary to recruit and retain. In some cases, the raises were 25–30 percent to catch drivers up on over 10 years of underpayment. These pay increases to drivers must be sustained. We must continue to recruit new drivers in our aging workforce. Our nation’s drivers must never be taken for granted again. The focus of all supply chain stakeholders must be to protect the livelihood of the driver.
In addition, it’s becoming difficult for smaller trucking companies to keep up with rapidly changing technology and customer requirements for near real-time visibility. Data integrations with multiple platforms are important to our ocean carriers, BCOs, and 3PL clients. The result of the industry’s technology demands causes an exodus of smaller trucking companies, depleting the capacity pool that much further.
Another major dynamic contributing to rising costs to the trucking industry is new legislation regarding asset-based freight in some states. IMC Companies is an asset-based company and is responding to these changes in our deployment of company trucks and drivers to serve these markets. The cost to run an asset- versus a non-asset–based operation is about 10 percent higher, and customers need to be mindful of the impact on capacity and costs as these trends continue.
Rising insurance costs also plague the trucking industry. Litigation targeting the industry and lack of tort control have contributed to double-digit increases in insurance costs.
In summary, the 2020 crystal ball sees shippers continuing to value the contracting model with their drayage providers. Companies like IMC are working hard to keep pricing stabilized, as we continue to incur rising costs and growing capacity to meet the demands of our shipping community.