Labor Shortage, Electronic Logging Complicate Freight

A tight labor market is leading to delays and rising costs for companies that use trains and trucks, and it’s creating a potential drag on profits.

The tightness in rail and trucking is an outgrowth of an economy that has been expanding for nine years and an unemployment rate near 4 percent. In the struggle to find workers, some trucking companies and railroads are having to pay up.

“It’s a tough driver market,” said Rick O’Dell, chief executive of trucking company Saia said. “We’re paying $5,000 signing bonuses in places to attract drivers.”

The Labor Department recently reported that compensation costs for private transportation and material moving workers—a category that includes truck drivers and railroad workers—were up 3.7 percent in the first quarter from a year earlier. That compared with 2.7 percent for all workers and marked the biggest gain since 2004.

In a tight shipping market, railroads and trucking companies can pass increased costs on to their customers. But it can be harder for customers to pass them on, which can cut profits. Specialty polymer company PolyOne said an 8 percent increase in freight costs knocked $2 million off its bottom line in the first quarter.

Some freight problems are due to weather and slowdowns associated with rail problems that appear to be resolved.

But starting late last year, most trucking companies have been required to record driver hours on electronic logging devices. That has made it harder for truckers to cheat on driving limits, effectively making the trucking market tighter.

Electronic logging has been a boon to railroads because it has prompted companies to shift more freight to rail.

Halliburton’s chief executive last week said that in the first quarter he “learned more about train logistics than I ever dreamed I would.”

Sources: Wall Street Journal, CNBC