The ongoing trucker shortage in the United States is causing significant ripple effects throughout the trucking industry, particularly impacting smaller trucking companies. Larger companies have an advantage because they can combine cost-saving measures across a larger fleet.
Smaller trucking companies don’t have that benefit. Instead, they have to take a lot of financial hits that are making it difficult for them to remain afloat. Knowing how to navigate through this economic slump is crucial for smaller carriers in order to sustain business. Doing so may be simpler than many business owners may think.
Increased operational costs
The scarcity of drivers drives up wages as companies compete for a limited pool of workers. While this is good for drivers, it places additional financial pressure on smaller carriers that may already be operating on thin margins. They may struggle to match the higher wages and attractive benefits packages offered by larger companies.
Ensuring up-to-date internal policies & procedures provide for a more stable work environment that may be attractive to drivers. Establishing safety measures to protect the drivers, as well as your company, from potential litigation, or worse. No matter what situation may arise, your business needs to be prepared to approach it, and with proper policies and procedures in place, resolution will be expeditious.
Smaller carriers have the upper hand in better work environments, compared to larger companies. These smaller carriers can attract drivers through the assurance that each driver is more involved towards the company’s success, as opposed to the mass assembly of drivers at much larger companies, which ultimately can give these drivers a greater sense of loyalty and pride towards these smaller carriers. Small trucking companies have the capacity to take better care of their drivers and provide more work for them, which is an important selling point when looking to recruit and keep more drivers.
Reduced capacity
With fewer drivers available, small trucking companies are often forced to operate below capacity. This means fewer deliveries, longer transit times and, ultimately, less revenue. With the inability to maintain a full roster of drivers, smaller carriers may feel the need to outsource their driving needs to Fleet Owners or third-party logistics providers, which can erode their profit margins.
If this is the case, smaller carriers will need to ensure that all the freight they touch is covered by their cargo and liability insurance. Additionally, they may need to confirm that have the appropriate authority to do so, such as brokerage authority or fleet insurance.
Higher freight rates
While a driver shortage can lead to higher freight rates (which could, in theory, benefit trucking companies), these increases often don’t keep pace with the rising operational costs caused by the shortage. Small companies, in particular, may find it hard to pass on these costs to customers who may opt for cheaper alternatives.
To survive and thrive amidst the driver shortage, smaller trucking companies need to find innovative ways to attract and retain drivers, such as offering competitive pay, flexible schedules and a positive work culture. They may also need to explore alternative business models or operational efficiencies to maintain profitability.
Weathering the storm
There is no question that the trucking industry is a volatile industry. Economic downturns have happened before and they will most definitely happen again. It is important that smaller carriers be proactive and prepared for the recurring flux of the trucking industry.
In the meantime, in addition to providing consistent and reliable service to their customers, small trucking companies should spend time revising their existing corporate structure and policies to ensure stability during future challenging economic periods. Establishing a strong corporate structure with proper insurance coverage and efficient internal policies and procedures are all key components in sustaining a stable business during economic recession. Stagnant business periods, such as now, are a good time to reset and evaluate your business framework to assure your business can withstand economic downturn in the future.
Fortunately, Arnett Law Group, LLC provides all the services your business needs to remain viable in such challenging economic times. Contact our office at (312) 561-5660 for more information or review our website at www.arnettlawgroup.com.
June 1, 2023
