Truck shipping

Delivery delays increase ahead of the holiday season

Aaron Terrazas, director of economic research at Convoy, joins Yahoo Finance to discuss supply chain bottlenecks and labor shortages in the trucking industry.

Video transcript

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ALEXIS CHRISTOFOUROS: Shipping operations at U.S. ports remain obstructed as ports, truckers and warehouses cannot find enough workers or cannot agree on hours of operation. Here to talk about it, it’s Aaron Terrazas. He is director of economic research at Convoy. Aaron, good to see you.

So I read that Nike didn’t have enough sneakers to sell for the holidays. The prices of artificial Christmas trees are skyrocketing, already up 25% because of these problems. What is the current level of delay in our busiest US ports?

AARON TERRAZAS: Well, it’s as bad as ever. A lot of the people who run the supply chains not just for Nike, but for just about every manufacturer and retailer in the United States, are doing a lot of scrambling right now. And they’ve been jostling each other for a few months at this point.

So you mentioned Los Angeles. The reality is, it’s not just Los Angeles. These are ports along the west coast. You see cargo that would have entered the Port of Los Angeles and diverted to the Gulf or East Coast ports when it can go. You see cross-border ports, like Vancouver, like Ensenada, bidding to attract some of these ships and truck them overland. All of this means that everyone is scrambling and doing a lot of last minute planning.

ALEXIS CHRISTOFOUROS: So tell me about the root of all this last minute scrambling. Is part of this perhaps a self-inflicted injury by the industry because it is still so archaic when you look at the processes to get goods into our ports?

AARON TERRAZAS: That’s a good point. Obviously, the pandemic and everything that has happened over the last year and a half has really revealed how fragile supply chains are. I think it’s something we came to terms with even before the pandemic. You think of the first impacts of the trade war between the United States and China. We were starting to see suspicion of this in 2019 and even in 2018.

But the reality is that there are still so many manual processes, so much paper and slow things happening in the freight industry. And we have made a lot of progress, without a doubt. You start to see things like efforts to decouple the tractor and the trailer, the front and the rear of the truck, so that drivers can use their time more efficiently, things like electronic documents and access. contactless to facilities. This has certainly increased the productivity of the drivers, especially for those drivers who make local trips, not necessarily for the long-haul drivers. But it is difficult to see these effects when upstream, distributors and manufacturers jostle each other.

ALEXIS CHRISTOFOUROS: Yes. Well, how are our ports and our truckers, I guess, compared to other parts of the world, Asia, which itself has huge ports, and parts of Europe?

AARON TERRAZAS: Yes. I mean, I think one of the issues that keeps coming up in the trucking industry right now is the labor shortage. And I think anytime you have extended hiring spells like we’ve had in the trucking industry, hiring challenges like we’ve had in the trucking industry for about a year, you’ve got three conversations.

There is a public conversation about relaxing regulatory barriers to entry. You see that with things like, in the infrastructure bill, there is a pilot project for young truck drivers between the ages of 18 and 21. You see conversations about access to foreign workers. I know the UK is making an offer to attract some of the truck drivers who have left due to Brexit. And you see a kind of conversation about automation and technology-enhanced productivity, which I just mentioned a moment ago.

ALEXIS CHRISTOFOUROS: Are there bright spots? Give us something that we can hold onto here. And do you see an area where some of the bottlenecks are easing? It may be in a certain industry, a certain sector versus another. Or is everyone sort of in the same boat, no pun intended, right now?

AARON TERRAZAS: [LAUGHS] Yeah no. I think a lot of the investments that are being made right now are going to pay dividends when demand starts to ease. We know that the economy has been heavily demand driven for the past year and a half. Consumer spending, sort of catching up in the manufacturing sector. As this abates, a lot of our investments in better productivity–

Again, I mentioned some sort of driver decoupling from the back of the truck. This allows drivers to use their time more efficiently, spending less time waiting for their trailer to be unloaded and loaded. Every 1% of freight that switches to this type of drop and hook model is equivalent to adding 10,000 drivers to the system. So I think these investments to improve productivity will pay off, hopefully as early as the spring or next year.

ALEXIS CHRISTOFOUROS: And could we then start to see some price pressures abate? Because we know that the prices for just about everything, including food and gasoline and furniture and everything else, are going up. And a big reason why these supply chain shortages are.

AARON TERRAZAS: That’s a good point. Truck prices and the cost of moving goods to businesses are up about 20% nationally year over year. Historically, companies have not passed this cost on to consumers. But at this point, it’s been rising for so long that they’re starting to pass some of that cost on to consumers. It is therefore one of the factors, among many others, of consumer price inflation.

I think when the freight market starts to slow down it’s hard to imagine we’re going to erase all of the gains we’ve seen over the past year. Look only at the wages of truckers. These are close to double digits over the past year, depending on whether or not you count one-off payments like bonuses. These wage gains are not going to go away once the market slows down.

ALEXIS CHRISTOFOUROS: OK. We will have to stop there, but to be continued, for sure. Aaron Terrazas, Director of Economic Research at Convoy, thank you for your ideas today.


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