William B. Cassidy, Senior Editor | May 08, 2012 1:55PM EDT
Trucking executives sounded a clear warning about rising costs Tuesday at the National Industrial Transportation League's Freight Policy Forum in Washington, D.C.
From driver wages to fuel and tractor prices to health insurance premiums, costs are rising at a steady pace, putting pressure on carrier margins and shipper budgets.
Shippers could face much higher transportation costs if the economic recovery picks up its pace, those carrier executives warned, as higher demand meets tight capacity.
"We're facing a lot of headwinds in all areas of cost," said Dan England, chairman of $1 billion truckload carrier C.R. England. "Driver costs, fuel costs, the cost of regulation."
"Insurance costs are going up, not just for vehicles but health insurance," said Rob Estes, Jr., president of Estes Express Lines, a $1.9 billion less-than-truckload carrier.
The health insurance premiums paid by Estes have risen 10 percent over five years, he told shippers at the NITL forum. The Richmond, Va., carrier is also raising pay.
"We gave our first pay raise in four years Jan. 1, a 2.5 percent pay increase," Estes said. "We're still behind the loop. We'll have to look pretty aggressively at it this year."
Overall, Estes expects a 4 to 4.5 percent increase in total costs in 2012. Truckload carrier executives who spoke on a NITL panel saw driver costs as the main problem.
"There's no question the largest issue we have is the driver capacity issue," said Scott Dobak, president of Roadrunner Transportation System, an LTL and truckload carrier.
Roadrunner contracts with independent drivers in both its LTL and truckload operations, and finding an adequate supply of owner-operators and small carriers is a challenge.
Independents and smaller carriers are having a harder time handling rising fuel and equipment costs than larger carriers, Dobak said, putting significant capacity at risk.
"The small mom and pop operations are under great pressure right now," he said. "You don't hear about major companies going under, but it's different with smaller players."
"The big overriding issue is cost containment for independent truck drivers," said Carl Bentzel, a spokesman for the Owner-Operator Independent Contractors Association.
A study conducted for OOIDA a few years ago found the average contractor spent 240 days on the road each year and after expenses netted about $38,000, Bentzel said.
"You can see there are a lot of dynamics here," said England. "If capacity continues to be more and more of an issue, these costs have got to be passed along."
Closer partnerships with shippers are the best way to manage higher costs and avoid rate spikes that could hit transportation budgets when the economy gains speed.
The word partnership gets overused, but the days of the cat and mouse game when everybody just tried to get the cheapest rates have come to an end," Dobak said.
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc