How Global Supply Chain Disruptions Affect the Trucking Industry

Trucking is one of the most vital industries to US Commerce. A small disturbance in the supply chain can have a huge impact on truckers, as well as those who depend on their services.

Supply chains have been getting more and more complex as globalization has grown. The global supply chain is a system that links together a number of international players in order to produce goods and services for the world’s population. The transportation industry is one of the most interconnected systems within the global supply chain. The trucking industry plays an important role because it is responsible for transporting goods across states and countries. As such, trucking companies are faced with challenges such as long commutes (both empty and loaded) and fuel costs.

The trucking business is vital to the economy of the United States. It is also a business that experiences supply chain disruptions on a regular basis many of which are never reported in the media. These disruptions can be caused by natural disasters, labor strikes, and even weather events. When these disruptions happen in the trucking industry it has an immediate impact on other industries such as manufacturing and retail because they rely so heavily on trucks for deliveries.

Trucking Companies endure the Pandemic

The Covid 19 Pandemic hit the trucking industry first, and there were a number of repercussions. A large number of drivers had to be taken off the road because they were unable to work. This increased the freight rates and there was a large shortage of truck capacity on the road. When demand for trucks outweighed supply, prices skyrocketed and then employers began cutting back on overtime and deliveries.

The pandemic also affected businesses that rely on truck transportation. Retail stores and manufacturing companies had to reduce order quantities or stop production altogether with the reduced number of trucks on the road.

TruckIng Industry Deals with a Shortage of Employees and Truck Drivers

The effects of the pandemic on the trucking sector were severe. This has created a scarcity of experienced drivers, which is likely to persist for some time after the pandemic is over. Employers have been forced to deal with the problem of finding and instructing new drivers as a result.

The pandemic also caused long-term damage to the trucking industry because it led many people to view this type of work as too risky or dangerous, which means there will be a reduced pool of candidates available for these jobs in coming years. There were significant layoffs of drivers, and that has created a shortage which will continue for the foreseeable future.

Because truckers are the ones who transport the vast majority of food and medication, they are among the most affected by the pandemic. For example, one out of three Americans depend on trucks for goods that they need to survive. The shortage of goods results in an increased rates for goods, which makes many people stop shopping at stores. The high number of truckers who have left the industry causes a shortage of experienced drivers, which makes companies consider hiring less-qualified individuals needing training to get their CDL’s, causing them to work longer hours with no overtime pay.

Global Supply Chain Crisis to Get Worse

The recent spate of global supply chain disruptions, which has been the driving force behind a market-wide selloff, is showing signs of spreading to other sectors. In the first six months of 2019, diversified industrial companies’ revenue declined 5% year-over-year, compared with a 3% decline in the prior two years combined. These disruptions have been hitting sales from three sectors: infrastructure, industrials and technology. Infrastructure sales to customers within the United States and abroad plunged 11%, as companies deferred or canceled projects amid trade tensions and uncertainty. Similarly, industrial and technology revenues both declined 8%.

Moody’s Analytics has predicted that the global supply chain will worsen, and the reasons for such predictions are varied, such as Chinese deceleration, Eurozone crisis, natural disasters, weak US growth, and the sovereign debt crisis in Europe. China’s economic slowdown has resulted in a sharp fall in imports from abroad, which predicts that there will be an increase in input costs. It is also expected that some companies will be more hesitant to start developing new projects because of projected lower demand. This is not good news for the world economy because these factors have created a global liquidity shortage which predicts that there will be fewer buyers.

The truck driver shortage has also contributed to the congestion in ports because there are not enough drivers to move stacked up containers and reduce the backlog of ocean vessels offshore. Other issues, such as new policy rules, volatile oil prices, and the use of aging equipment, have contributed to the scarcity of truck drivers. Despite these effects, the trucking industry is not able to attract enough workers with a lack of experienced drivers. Despite increased demand, transportation businesses’ profit margins have shrunk as input prices have risen.

The effects of supply chain disruptions can be devastating. When trucking companies are faced with difficult operating environments, the need to shut down or scale back operations and prevent exposure is crucial for both safety and financial reasons. As a result, it’s vital that these companies have contingency plans in place before there is any disruption so they’re not caught unprepared when disaster strikes.

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  1. Steven Beck says:

    Hi Craig:

    Very informative article. Curious as to your thoughts as to the relative impact of “new policy rules” as compared to other factors contributing to supply chain disruptions. For example, to what extent do you think the settlement payouts from Roadrunner, Ruan and Boise Cascade with U.S. EPA have exacerbated supply chain disruptions at POLA and POLB?

    I’ve heard that these settlements and the related fiscal risk of utilizing older trucks not complying with California Truck and Bus Regulation and Dryage Truck Regulations has impacted the number of trucks available to haul containers out of these ports.

    Would very much appreciate your thoughts on this.

    Thank you,

    Steve Beck

    1. Craig Robins says:

      The “new policy rules” you reference have played a part in the current disruptions we are seeing. It’s one part of many but it will continue to be a burden on the industry. Your point on older equipment regulations has also been been a big issue on West Coast and will continue to impact service levels.

      There are no more vital players to the efficient running of the supply chain than truck drivers. 70% of POLA and POLB cargo is moved by truck.

      A lot of the current problem falls squarely with the ocean shippers as well. A lot of the parties need to start working better together or the logjams will only get worse.

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