Trucking Companies Race to Add Capacity, Drivers as Market Heats Up
Process improvement and process re-engineering have become increasingly important as technology and the world economy change. If a company cannot improve the efficiency or quality of their products or services, they will end up failing fast next to their succeeding competitors. After all, people nowadays do not settle for slow speeds or a lack of quality. Look at what happened to cable companies and video rental stores.
The e-commerce industry and the booming economy is heavily increasing demand for trucks on the road to ship products. Retailers are hiring thousands and thousands of trucks for clothing, construction equipment, and other goods as mentioned in the article. To match the heavy demand for shipping, carriers have started to charge 22% more than they did a year ago in hopes that the increase would lead to higher profits. Simple supply and demand economics at play.
What trucking companies did not expect was the their struggle to match this heavy demand. Finding drivers for trucks and trucks themselves is easier said than done. What’s more, is that veteran truck drivers are retiring and new laws are coming out that prevent truck drivers on the road if they have been driving for a certain amount of hours consecutively. The trucking companies of the world like JB Hunt Transport earned 13% more in revenue, but unfortunately had operating income fall 5% because of these problems. Without a doubt, a closer look at process improvement, and perhaps even process re-engineering, is necessary in this changing economy.
In order to take a closer look, evaluating their current operations is required. If I were to create a fishbone chart to look at “The Problem” of rising demand for trucks, one option I would look at would be the “People” – specifically their wages, training, experience, and the amount of workers. Based on the article, truck drivers are really lacking right now, with an increase of “unseated trucks” (trucks without a driver to drive it). Increasing wages could be a reason for this, preventing companies like JB Hunt Transport to hire new workers without hurting their margins. So, perhaps they could focus their process improvement on the “Process” – transportation, speed, and quality delivery. This would be ideal because for the incredible amounts of products that need to be shipped.
The fishbone chart’s look into the “Process” can also reveal insight on a possible process re-engineering. While they would be directly competing with Amazon, a new technological shipping trend emerging currently is the idea of drones. If a trucking company were to find a way to approach that market with sound technology, they could completely revolutionize the “Process” shown in the fishbone chart, and even alleviate some of the problems with the truck driver workers. A company like JB Hunt Transport could do this, given their investments are both in train and truck. It would be an incredible, even insurmountable, task to add air support shipping like drones to their portfolio.
A fishbone chart can be used to identify a problem, but also to find a solution. In this case, the problem has been well identified; trucks drivers are lacking, so in order to hire them their salary has to ve very high, which leads JB Hunt Transport to increase their expenses and end up with a negative operation income.
Once the problem has been detected the next step is to find a solution. A new shipping trend could be the solution, with the drones. But, by doing that, a company like JB Hunt Transportation that is not especialized in technology, will have to make a huge investment. So, the company must know that, if they want to go for it they will have negative profits at the beggining, but, later on, if the drones work as planned, their expenses will decrease and their profits will increase.
The decision of changing their shipping (transportation) systemn has to be studied very carefully because we are talking a big investment, made by a company with no experience at all in technology. But, the reality is that the truck drivers are bringing very high expenses, so, either they find a new shipping system (with for example, the drones), or they find a way to decrease the drivers´salary; which does not seems that easy because there is a high demand of this drivers and a small offer.
An aspect that I think will have a major role in the processes of shipping companies and the transportation industry is automation. We have all heard a lot about the progress and impact of self-driving cars, but the field where that technology could have the greatest impact, in my opinion, is transportation. As you mentioned, many trucks sit, out of use, representing a wasted investment that continues to depreciate for trucking companies. According to your post, the issue does not appear to be the demand for transportation, as online shopping continues to increase the need to get goods from warehouses to homes. Instead, the shortage is in the number of people willing and able to operate these trucks. A clear solution for the transportation industry would be automated trucks, very much along the lines of drone transportation. Trucks, outfitted with this technology, would be able to function nearly continuously, provided shipments are available. Of course, this technology would not be cheap. Integrating these capabilities across the massive quantities of trucks in the transportation industry would come at a huge cost. In the long run, however, I think many companies would find this process re-engineering worthwhile. Over time, the relatively low cost of upkeep on truck technology would be very preferable to paying a full fleet of drivers, not to mention the added benefit of being able to put more trucks on the road. I think this will likely be the biggest area that automobile automation impacts, and it will have a tremendous effect on how we get our goods.
I think is very interesting what you say about the automation of trucking and I found an article that is very interesting. It basically said that, the White House has released a report saying that between 1.3 million and 1.7 trucks drivers could disappear because of automation. It also mentions that this technology is already being used in some companies. And the last thing that it mentions and it also interesting is that some companies are experimenting with platooning as well, which is an automated technology that vehicles use to drive closer to each other than they would with human operators, which leads to a saving in fuel cost and a reduction in emission.
Here is the link of the article: https://www.theatlantic.com/business/archive/2017/02/when-robots-take-bad-jobs/517953/
On this point of driverless vehicles, I found an interesting report of how such a transition would take place. What I read was in line with what Nick pointed out, that this would certainly be a big investment but the benefits would be significant. In the logistics industry, the salaries of truck drivers make up about a third of the total transport costs, and seeing as it is becoming more problematic in finding drivers, this transition could be quicker than maybe most people think. Considering the obvious benefit of lower salary costs, as well as greater safety along with lower insurance premiums, companies would certainly invest in automation long term if available. A big obstacle, however, would be possible government intervention or regulation. How the government reacts when this technology becomes strong enough to implement will obviously play a big role in how it is utilized by businesses. Other countries, like the UK and Germany, have shown their support for this technology, but it will be interesting to see the United States’ stance on this topic moving forward.
Source: http://www.driverless-future.com/?page_id=774
The Higher demand for Truck drivers that Brandon has argued here is a problem of supply and demand, in which there is a high demand, but not a large supply. In a business with unfavorable hours and as I would describe, a boring work environment, new drivers that are qualified are not easy to find. The comment of Amazon, and new technology providing person less shipping is the same struggle that will eventually put Uber drivers out of business. Currently the demand for Uber drivers and truck drivers is increasing, but once technology catches up to both industries, the demand for these drivers will plummet. This is very relevant to the current day situation because the more demand we see now with these industries, the steeper the drop will be when the jobs or no longer available to anyone.
Tommy, among others, has raised the issue of the supply and demand in the trucking and shipping industry. While fish bone diagrams and other process analysis tools have been demonstrated in class through a wide lens, this situation requires a far more in depth look at the underlying issue. For example, when addressing the supply and demand discrepancy in the trucking industry, some people might use a fish bone diagram and with expensive shipping costs as the problem and come to the conclusion that there is a limited supply of trucks and drivers, with an increased demand for shipping. Rather, we should utilize our process analysis tools to find identify the reasons why there is a low supply of trucks or a low supply of drivers. Analyzing the issue this way will provide much more valuable information in making process decisions. The process of training and recruiting truck drivers might have minor flaws, or it could need to be completely re-engineered. Once we have information regarding this specific issue, then it is appropriate to start considering alternatives such as automation.