The truck driver shortage that is inflating supply chain costs has provoked heated debate over how the industry can solve this perennial problem. Much of the debate centers on how driver recruitment and retention policies can be changed, but another response is to reconfigure supply chains to operate in a driver-constrained environment.
Penske Logistics is helping manufacturers to change their supply chains in this way. The strategy enables companies to minimize both the cost increases and service interruptions caused by the crisis.
The American Trucking Associations estimates that there is a shortage of more than 50,000 qualified truck drivers in the United States, and the gap is getting wider.
Given that some 71% of the freight tonnage moved in the U.S. is carried by trucks, such a huge shortfall is a significant drag on the efficiency of the supply chains that support economic activity.
The dearth of truck drivers is a long-standing problem in the industry, but low unemployment rates and a strong economy are widening the gap between supply and demand.
Carriers have introduced various measures to attract more drivers. Automation could alleviate the problem, especially vehicle self-drive technology that could ultimately eliminate the need for human drivers. But the timescale for implementing these innovations is uncertain. Meanwhile, many manufacturers are scrambling to find enough truck capacity to move their goods, and freight transportation costs are rising.
Another response is to adapt supply chains to markets where a scarcity of drivers is the norm.
"We often redesign supply chains for customers, taking into account variables such as where warehouses should be located, the distribution of suppliers and the pooling of loads," says Amy Ilyes, vice president of logistics engineering for Penske Logistics.
Now this modeling expertise and technical know-how are being used to reconfigure supply chains in response to truck driver shortage issues.
One approach is to change the type of trucks that deliver freight. "We recently put together a new transportation system design for one of our marquee customers that changes the trucks used from tractor-trailers to straight trucks," explained Ilyes.
The shift broadens the pool of drivers to include those with a Class B license. A Class B commercial driver’s license allows an individual to operate any heavy straight vehicle with a gross weight rating greater than 26,000 pounds. Class A drivers can operate any vehicle with a semi-trailer or trailer with two or more axles.
The change might appear straightforward, but shifting to smaller trucks to move freight has supply chain repercussions that manufacturers need to be aware of. For example, deploying smaller trucks on delivery routes can increase a company’s carbon footprint.
More immediately, there are important operational issues that must be addressed. For example, Ilyes said, "There is less product in each trailer and we have to mitigate the expense of operating smaller vehicles, which can mean changing the number and frequency of deliveries." This requires modifications to the distribution network. Suppliers might be called on to alter their production schedules and inventory management practices to support the redesigned network. And it’s likely that more inventory will be needed to make the Class B operation work.
"But we are very experienced in making these types of tradeoffs. Also, designing supply chains for smaller loads has become more commonplace due to the growth of e-commerce," Ilyes pointed out.
Another strategy is to take miles out of distribution networks by storing supplies closer to manufacturing plants. This is already a notable trend, said Ilyes, but it can be part of the playbook for combating driver shortages by reducing the number of miles driven.
Again, there are important repercussions that need to be accounted for. Transportation and inventory holding costs might increase, for example. Positioning inventory close to manufacturing sites also runs counter to just-in-time supply chain strategies that are based on the concept of reducing inventory by carefully synchronizing the delivery of supplies with the demands of production lines.
"Transportation is a major driver of supply chain costs. And transportation costs are rising rapidly, which is why we tend to focus on transportation first when we undertake network optimizations and redesigns, then we’ll look at other costs such as warehousing," says Ilyes.
In addition to providing the technical expertise required to develop these solutions, a third-party logistics provider can help implement the changes.
A specific example cited by Ilyes is helping suppliers adjust their production schedules and inventory holdings to revamped delivery timetables. "We often take responsibility for ensuring that suppliers comply with changes like these," she said.
Rethinking supply chains will not solve the driver scarcity issue, but it will help manufacturers weather the storm. And other mitigating strategies are likely to emerge. For example, Penske Logistics is developing a freight pooling system designed to reduce the number of empty miles driven in distribution networks.