As a new year starts taking shape, it’s a good time to look at the challenges the trucking industry faces in 2023. A lot is going on that has people worried, and one of them was the bankruptcies of several large and small trucking companies in 2022.
A Vermont trucking company specializing in hazmat loads shut its doors suddenly last July after more than 50 years in business. When United Furniture Industries laid off all employees right before Thanksgiving, it also led to the closure of UFI Transportation, terminating the jobs of more than 210 drivers.
What is behind these closures and bankruptcies? Some of it comes down to rising costs. The cost of diesel went from an average of $3.852 per gallon in 2021 to $4.989 per gallon in 2022. As of January 2023, the average price per gallon is $4.576. Beyond the cost of fuel, here are the biggest obstacles the trucking industry faces in 2023.
The Driver Shortage Continues
While the driver shortage is showing signs of improvement, it’s not fully recovered. The chief economist for the American Trucking Association reports the shortage is still at approximately 78,000. Pay increases have helped, but as prices climb in other areas, some trucking company owners may find it harder to give generous raises this year.
One way to attract new drivers is by offering on-demand pay. Instead of making your drivers wait a week or two for the next payday to arrive, offer on-demand pay. Your drivers can request payment when it’s needed, which is helpful if bills are due before the usual payday.
A Lack of Truck Parking
Drivers can only drive so many hours before breaks are mandatory. If your driver is nearing the max, but rest stops with truck parking are closed or there’s nothing for several miles, you risk having a driver exceed the maximum number of hours he or she is allowed to drive.
It’s estimated that drivers spend upwards of an hour every day looking for adequate parking. If a long-haul driver is nearing the 11-hour limit, most will stop driving at the 10-hour mark in order to have enough time to find parking. This takes an hour off of your driver’s actual transportation time.
If you push your drivers to stay on the road for 11 hours, you risk that driver having no choice but to pull over and park on the side of the road and hope for the best. It’s not safe, and it’s one of the biggest problems the trucking industry faces in 2023. Some states (Florida, Kentucky, Montana, and Tennessee) received government funds to address the problem, but there are still many others with work to do.
When you’re assigning routes for your driver, look for truck parking in that area and add some room for traffic jams and unexpected weather. The more planning you put into finding truck parking along the route and building routes that have pick-ups and drop-offs near truck parking areas, the less stressful it is for your drivers. You can use Saint John Capital features like finding and tracking loads to create the best truck routes for each driver.
Supply Chain Issues Impact Repairs
If a truck or trailer breaks down, it can take time to get a replacement part. On an older model, it can mean you have a truck that’s out of service for weeks. When parts are out of stock, your mechanic may need extra time to find the right part, and then it takes time to arrive. You may have to pay a lot more if your usual supplier is out of that part.
You also have the problem that occurs with how long it takes to make the repair. If you don’t have an in-house mechanic, you have to wait for a local truck mechanic to have an opening.
Rising Interest Rates
Credit card rates are based on the Federal Funds rate. It’s a measure the FOMC banking experts take to tame inflation, but for the layperson, it means interest rates are going to climb. If you carry any credit card debt, these rate hikes can hurt your bottom line. The past eight hikes have been pretty substantial:
March 2022 – +25
May 2022 – +50
June 2022 – +75
July 2022 – +75
September – +75
November – +75
December – +50
January – +25
In all, this equates to an interest rate hike of 4.5% in the past year, and it’s predicted to soon top 5%. If you had an emergency truck repair that you had no choice but to put on a credit card, you’re paying more. It’s a good time to consider looking into a low-interest business loan to get a more favorable interest rate.
Across the U.S., the average credit card interest rate is currently 23.55%. Gas rewards cards average 23.58%. Meanwhile, the average interest rate on a business line of credit is 5.39% (fixed) or 6.25% (variable). You’ll save a lot of money with a line of credit.
Difficulty Getting Loans
As interest rates increase, lenders may start being a little more restrictive. They don’t want to take on unnecessary risk through a loan to a high-risk borrower. If you have a truck that’s beyond repair, you might find it difficult to get a new truck loan. If you qualify, your new truck loan payment will be much higher than it was in the past, which may make the affordability of a new truck too much for your budget.
Before you purchase a new rig, it’s important to consider changes that California is considering. The state wants to phase out gas-powered rigs and only have manufacturers selling electric medium- and heavy-duty trucks by 2040. That’s still 17 years away, but it’s time to start thinking of this and planning for the future.
Even if you manage to get a great truck loan rate, the insurance cost for truckers keeps increasing. It’s believed to have increased by close to 50% per mile in the past decade. It’s important to shop around and get the best insurance rate you can without risking too much on poor coverage.
Another problem is that everyone is feeling the pinch. As the cost of utilities, groceries, office supplies, and everything else increases, it makes it hard for everyone to keep up with bills. If you have a client experiencing financial hardship, their delayed payment impacts your business. While you sympathize with them, you need the money and cannot afford to wait.
Get paid immediately after delivering a load. When money is tight, you shouldn’t have to wait for a payment to come in weeks or even months after finishing the job. Saint John Capital ensures you get paid the same day or within a couple of days, depending on the payment options you set up.
Sign up for a Saint John Capital Visa and enjoy the ability to get paid the very same day as long as you submit your bill of lading by the daily cut-off point. Imagine how much easier it is to run your business when you have a steady flow of money coming in. Learn more about same-day payments and fuel savings cards.