The transportation industry has faced a series of challenges since the start of the pandemic. Businesses and workers have had to navigate global shortages, loss of labor, safety issues, and demand. Even though the transportation industry faced similar pandemic-related roadblocks as the rest of the world, their demand increased as the delivery of goods became imperative. Those in the industry were forced to rework their logistics and operation, and the market has been relatively unstable. Today, the nation is still facing a looming recession and economic uncertainty that plays a role in the transportation market. Understanding what lies ahead can help your business prepare, and set yourself up for success.
Three Issues the Transporation Market is Facing
Prior to the new year, market experts take a deeprt dive into the previous year to understand what aspects led to successes, and what aspects led to challenges. In addition, they take into consideration current socio-economic conditions, and make predictions for the upcoming year. In 2023, insurance and industry experts who rely heavily on these details have come to similar conclusions about what challenges will remain: labor shortages, the economy, and manufacturing delays.
In 2020, the trucking industry experienced a loss of over 100,000 jobs. April 2020 saw the worst loss for truck drivers, with 83,000 ocurring in a single month. 20.5 million payrolls were cut that month, which was 25 times worse than the highest losses during the 2008 recession.
97% of all trucking companies operate with fewer than 20 trucks, meaning each driver plays a critical role in the completion of a job. With the onset of the pandemic, businesses had to scramble to keep qualified workers and operate on a schedule that would allow sufficient time for deliveries without overworking their employees. Post-pandemic, most people expected the labor market to return to normal, but the shortages have remained. One major aspect of the continued losses can be attributed to unemployment and stimulus checks. Workers were getting paid more money from the government than their typical salary and chose to continue collecting instead of returning to the workforce.
The pandemic also provided an extended period of time for people to reconsider their profession, which led to the so-called “Great Resignation”. Truckers can earn a comfortable living, but the hours can be long and grueling. The introduction of remote work brought new opportunities for younger employees in the trucking industry to make career changes, without sacrificing pay. Today, trucking companies are having a challenging time getting new hires, and are facing high turnover rates post-hire.
These two factors bring us to the most significant labor issue for 2023: retirement. The average age of the trucking workforce is 48, and a significant amount of workers are nearing retirement. Since there has been a challenge in hiring new employees, the aging workforce will likely lead to more significant shortages in the year ahead. Experts predict the current shortages will more than double by 2030.
The second key challenge for the trucking industry in 2023 is the economy. 2022 saw a 6.5% inflation spike, following the 7.6% increase from 2021. While every industry and individual in the U.S. has been affected by inflation, the trucking industry has experienced a harder hit than most. Trucking businesses faced rising labor costs, extreme increases in fuel costs, and record-breaking replacement costs. Raw material like steel, aluminum, and lumber has brought the average truck costs up by almost $10,000, and the average replacement part cost up by 10%. With both the cost of labor and the cost to operate so high, it’s difficult for companies to stay in business without suffering financial losses. With the industry relying so heavily on the quality of equipment and drivers, cutting quality with either isn’t a good option.
Additionally, the state of the economy is slowing down spending. During the pandemic, there was a huge increase in demand due to social distancing and shopping from home, as well as stimulus checks. For next year, 83% of Americans say they will be cutting down on spending. Since the trucking industry depends on demand, it may lead to additional losses.
The quality of trucks used in a fleet is imperative for the industry to remain successful. Aside from the basic needs of modern vehicles, newer trucks contain safety advancements and automated technology. Each year on average, the industry requires up to 250,000 new trucks to maintain standards for fleet ages. As trucks age and become outdated, they’re swapped for new ones. Since the pandemic, however, manufacturing delays have made it extremely challenging to acquire new vehicles and new parts. Even newer fleets with simple maintenance needs may wait months for new parts.
In 2022, the industry was forced to keep older vehicles on the road due to a backlog of manufacturing parts. The good news is that this year, manufacturing should be back to normal. The only issue that remains is the backlog, and additional delays while manufacturing addresses the long list of trucks still waiting for maintenance. So while there should be improvements in 2023 with some fleets able to be updated, the price point will remain high. In combination with labor shortages and wage increases, some fleets will need to keep their older trucks on the road.
Trucking Insurance is a Necessity for 2023
More than ever, trucking insurance will play a critical role in risk management for the trucking industry. With older vehicles on the road, heavier loads to make up for fewer drivers and gas prices, and an aging workforce, there’s an increased risk of a claim.
Trucking insurance will cover these risks and ensure that if and when there is a claim, your business in financially protected. Your insurance policy should include coverage for your physical vehicles, liability, products, general liability, cyber, and cargo. The industry is headed toward a more positive future, but risks still remain. Proper coverage will ensure your business continues to thrive, even while facing challenges.
Protect Your Business with ECBM
At ECBM, we pride ourselves on providing high-quality coverage for the best price. We have extensive experience in the trucking industry, and our approach provides far beyond coverage options. With a team of risk management consultants and experienced brokers, we can ensure your business is evaluated, and that any potential coverage gaps or unforeseen risks are protected. For more information on our services, contact us.