According to a recent survey conducted by the Owner-Operator Independent Drivers Association (OOIDA) Foundation, the freight market’s struggle is forcing owner-operators out of the industry. The survey, which received responses from over 300 OOIDA members, revealed that 54% of respondents held a negative forecast for 2023.
Concerns such as mounting regulations, inflation, and an overall cooling economy were cited as key factors contributing to the industry’s slowdown. Furthermore, the survey highlighted the challenges faced by owner-operators, who struggle to survive in the face of fierce competition from large fleets that can absorb costs and negotiate discounts effectively.
In this article, we’ll delve into the primary reasons behind the recent slowdown in the trucking industry and explore actionable steps to maintain a profitable operation.
Trucking was sitting pretty a few years back, prompting many people to jump into the industry and buy equipment at overvalued prices. Then freight rates dropped, causing these up-starts to lose their shirts. It’s now expected that earnings for truckload carriers may lower by 14% in 2023.
Spot market truckload freight illustrates the situation well. In 2021, spot market dry-van rates were up by 30%. But in 2022, they decreased by 19%, as the industry reeled from rising insurance, fuel, and equipment costs as well as driver shortages.
Higher interest rates will make financing more expensive, and used-truck prices will continue to fall. These challenges will put constant pressure on truck fleet profits unless wages start lagging behind customer rates.
Trucking companies are facing new challenges as they strive to comply with updated regulations. Federal guidelines, emissions controls, green energy protocols, and changes in carbon credits bring about additional costs and increase the risk of fines and non-compliance fees.
These circumstances make it even more difficult for companies to recover, especially in the aftermath of a global pandemic, where managing freight costs becomes a tough task. Non-compliance can result in reputational damage and fines, so make sure you’re dedicating the time and expertise to keep your fleet in compliance.
Driver retention challenges
In the current uncertain landscape of the carrier network, drivers may be nervous to commit to one trucking company or another. In these volatile times, many drivers are prioritizing spot contracts to avoid excessive commitments. The challenge lies in attracting and retaining drivers, which is becoming harder to do.
The industry is still low on data showing the best way to recruit and retain drivers, which makes it hard to build a dependable carrier network. Fluctuating freight capacity and driver availability add to the challenges of budgeting, expense planning, and maintaining profitable margins.
Running a trucking business comes with its fair share of steady expenses, but let’s not forget about the wildcards: the variable costs. Things can go south as expenses like road tolls vary from state to state. Many estimate that fuel gobbles up about 20% of your business’s operating costs, but as far as the specific prices are concerned, it’s a spinning roulette wheel from one state to another.
Now, here’s where things get even more unpredictable: maintenance and repairs. While regular upkeep may stay somewhat stable, repairs can throw a curveball, costing you a fortune depending on the issue at hand. And with many drivers hanging onto equipment longer to hedge against high equipment prices, maintenance can really add up.
How to Maintain Your Profits in A Slowdown
A down market may not be the most favorable situation, but if you’re smart and strategic and use the right tools, you can stay profitable. Here are some tips to help you thrive during the slowdown:
1) Maximize your capacity
Optimize your trucking business’s capacity by strategically managing your fleet and resources. Make sure you’re using your trucks as efficiently as possible so you aren’t paying for empty miles. Identify opportunities for backhauling or load consolidation to maximize revenue per trip.
2) Improve driver retention with an all-in-one TMS
An all-in-one Trucking Management Software (TMS) has tools to help improve driver retention. With automated features, such as auto-recurring deductions and easy management of payroll periods, you can ensure accurate and timely payments to your drivers. The system calculates compensation based on load percentages, distance traveled, or hours worked, providing transparency and ease of administration.
3) Promote transparency with a Pay Per Hour model
Improve driver satisfaction and retention by implementing a Pay Per Hour system. Allow drivers to clock in and out, with the system automatically detecting their location. This not only simplifies payroll calculations but also fosters transparency and fairness, ensuring drivers are paid for their time accurately.
4) Ensure compliance and avoid audit fees
Look for an all-in-one truck management software that integrates compliance into its feature set. Trucking management software solutions like AxisTMS allow you to set up driver agreements, safety records, compensation details and more. Trust their guidance to navigate the complex regulatory landscape and maintain a strong and compliant trucking operation.