Drayage is an integral part of the logistics chain and so it is with some trepidation that rumblings of impending cost increases are received. With the difficulties stemming from congestion at ports not just in the Los Angeles area but across the country and indeed the world, these rumors can be especially galling. There are currently two major sources of these expectations, but it is prudent to assess them for validity before making any big changes.
The Chassis Shortage
We have previously detailed on this blog the ongoing chassis shortage, but as this is one of the core areas which could affect future prices it bears mentioning. The chassis shortage, caused in part by the so-called Roadability Rule, has created problems for Los Angeles drayage which all logistics companies are struggling to work with. Considerable numbers of chassis have been ruled unusable and abandoned rather than restored, whilst the traditional owners of chassis – ocean carriers – have been exiting the chassis business with considerable speed.
The consequences of this are simple and serious; there aren’t enough chassis to do everything that needs to be done. This has a knock-on effect whereby numerous other aspects relating to the chassis business are affected as well.
However, although this is having a short-term effect on prices, it remains to be seen how much long-term influence the chassis shortage will have. Once the needed investments are made, technologies are developed, and new business models are found to replace the departing ocean carriers, it is feasible – though not guaranteed – that prices could decrease again.
The other really major issues for Los Angeles drayage are those posed by acquiring and retaining sufficient labor to get the work done. There are conflicting factors involved in this issue and these conflicts are making it difficult to resolve.
As it stands, many truck drivers do not feel they are being compensated fairly and many companies struggle to attract and retain top trucking talent. Clearly, many owner operators do not agree that current rates are meeting a reasonable standard, which stands in contrast to the years from the 60s to the 80s, when driving freight was a fairly well-paid career.
Additional stress on drivers is also coming from various regulations that must be obeyed. No responsible company objects to regulations in principle, but when they are onerous and ever-changing, it becomes a burden on all parts of the operation. Drivers are tired of the changing regulations and the burdens placed on them. These unhappy drivers are prone to leaving the industry and, as with others in the shipping business, attempting industrial action to improve their conditions. However, increasing the wages of drivers would go a long way to improving recruitment and retention, but it will necessarily impact costs.
Although addressing the problems of the chassis shortage and attendant reorganization of the drayage business model could be a cost which passes, it looks as though there will be little choice but to improve the conditions and remuneration for drivers. The cost increases might be a bitter pill, but the only alternative is to watch as drayage in Los Angeles and throughout the continent grinds to a halt and goods do not reach their destinations.
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