What You Need to Know About Procurement and the Transportation Industry

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Truckers have a saying, “If you’ve got it, a trucker brought it.” To a large extent, this is true. Many finished products take several truck rides, beginning when the raw materials are brought to the supplier, then when the supplier sends parts to the manufacturer, again when the manufacturer ships the product to a distribution center, and finally when the distribution center sends the product to the retailer. So, if you’re in procurement, you need to understand how changes in the trucking industry will affect your supply lines.

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Lack of Qualified Drivers

The exorbitant costs of insuring fleet vehicles and drivers is forcing many trucking companies to take experienced, professional truck drivers off the roads. Lawsuits are driving up claims costs for insurance companies, which are in turn passing those costs onto the trucking companies. This problem, combined with stricter government regulations on trucks, trailers, and drivers, is causing a shortage of qualified truck drivers to transport goods.

Though truck driving schools are graduating more CDL licensed drivers than ever, a large percentage of these new graduates never get hired due to past convictions or a poor driving record. For insurance purposes, companies loathe to employ a driver with any significant accident on his record, regardless of fault. Qualified, insurable drivers are hard to find, and harder to keep. This makes procuring goods more difficult.

Higher Fuel Costs

Trucking companies get paid by the mile and the weight of the cargo, but they’re incurring fuel costs far beyond what it takes to travel from point A to point B with X weight. Traffic jams, highway accidents, and trucks idling for breaks or mechanical issues drive up fuel prices for trucking companies even more. As consumers whine about prices at the pump, these costs are literally driving trucking companies out of business. Trouble in the oil rich Middle East is another concern. These elevated prices are passed to their customers.

Government Regulations

The government is cracking down on trucking companies, long blamed for poor environmental performance. High fuel consumption combined with high emissions means stricter policies for fuel-efficient, low emissions vehicles. According to a recent Equipment World Infographic entitled Greening the Fleet, diesel truck emissions have fallen 95 percent since in the past 20 years. However, trucking companies are paying for these new technologies.

Most national trucking chains are investing in new vehicles to meet government deadlines for compliance. But the money for this equipment has to come from somewhere – so it gets passed to the shipper. While trucking companies are cleaning up their environmental acts, expect to pay more for shipping services.

Border Patrol Policies

Due to the rise in terrorist acts, ongoing debates on immigration policies, and the war on drugs, it’s harder for trucking companies to service North America. Travel across the U.S.-Canadian and U.S.-Mexican borders is becoming more difficult. Additionally, truck drivers with any felony convictions aren’t allowed to cross into Canada, further limiting the available drivers to make these deliveries. If your shipping needs cross borders, expect to pay more while receiving slower service.

Procurement professionals need to get involved politically to protect their interests when it comes to issues in the transportation industry. [/show_to]

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