Why carrier prices are expected to rise throughout 2014

How are rising carrier prices going to affect the logistics industry?

Whichwarehouse believes that first, many carriers are still experiencing a shortage of skilled drivers. courier servicesMost, it seems, have under-reported this to the press to avoid panicking customers, as well. Even with immigration from Europe, the UK trucking industry isn’t bringing in new drivers as fast as it would like to, and capacity is not growing as fast as demand is.

If this continues, carrier prices will have to go up.

To add further pressure to the trucking sector, many of the best drivers are quite close to retirement. The average age of drivers is quite high due to the not taking on new drivers during the recession, and now there is a gap of moderately-experienced drivers. Most are new or quite old, and that isn’t a stable set up. Attracting new drivers means offering higher wages, and those costs get passed on.

Second, and partially due to the first point, some of the larger carriers are not planning on increasing the size of their fleets. From their point of view, they are publicly traded for the most part, and would have to make a business case for investing in more equipment (easy to find) and new drivers (hard to find and expensive). If they can make just as much money consolidating at the same size, they won’t risk expanding. Shareholders are still nervous, and expecting this bubble to burst just like the last few did. They might even be right. This is good news for smaller, privately held outfits, as they can take the risk, and reap the rewards. As demand rises, shippers will be forced to use these smaller, more expensive carriers. Again, costs go up.

Lastly, as more shippers rely on small carriers to move the goods they can’t through their preferred carriers, they rely more on brokerages to source the capacity. These brokers will be raising their rates because shippers won’t be able to operate without them, and that’s how businesses work. They aren’t charities, and more than we are. So the costs go up even further.

So what can we do? We can plan ahead. Shipping will either get more expensive, or it won’t, but having a plan in place for if (when) costs increase will take a little of the sting out of it. 


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