‘Amazon Effect’ may explain rising driver turnover in truckload
| January 27, 2020
The “Amazon Effect” could explain the recent spike in driver turnover. Traditionally, driver turnover rates go down when freight demand is relatively soft, as it was in 2019, but turnover has counterintuitively been rising.
The term “Amazon Effect” is generally used to describe the metamorphosis of supply chains in response to rising consumer expectations for delivery of goods purchased online or in stores. Shippers are changing their freight distribution models to shorten the distances between warehouses and customers to achieve same and next-day deliveries.
The American Trucking Associations (ATA) reported turnover increased 9 points during the third quarter of 2019 for large carriers, hitting an annualized rate of 96%. The ATA defines large truckload fleets as those with more than $30 million in annual revenue.
The third-quarter increase was the largest quarterly uptick recorded by ATA since the second quarter of 2016, and the 96% churn is the highest on record since the second quarter of 2018. Smaller carriers saw turnover increase six points to hit a 73% annualized rate.
Driver pay was supposed to be less of an issue when the trucking industry made significant increases to mileage-based pay rates in 2018. Carriers maintained their rates in 2019, but drivers are getting fewer miles. According to a recent survey of 62 truckload carriers, average annual miles for drivers fell 11% in 2019 from 124,244 in 2018 to 108,777 in 2019.
The survey was conducted by CarriersEdge, a provider of online driver training courses, in partnership with the Truckload Carriers Association (TCA) for its Best Fleets to Drive For program. Carriers surveyed for the TCA program ranged from small operators of 14 trucks to mega fleets with more than 8,000 power units.
Average length-of-haul (LOH) for truckload shipments has been sliding for at least a decade, but the trend has accelerated in the last 24 months.
The average LOH for publicly traded truckload carriers was 574 miles in 2010 and 510 miles in 2019. Data from FTR, a leader in freight transport intelligence, shows the average length of haul — measured in miles per freight ton — declined by 7.2% from 2010 to 2019 for Class 8 tractor-trailers.
The Commodity Flow Survey, released every five years by the Department of Transportation, shows the average shipment distance for all trucks declined 17.2% from 2012 to 2017.
New research by Stay Metrics, a provider of driver retention tools, shows that drivers were dissatisfied with pay in 2019, and the dissatisfaction was a top predictor of turnover. The company released an updated Stay Index on Jan. 27 with a Top 10 list of areas of opportunity for motor carriers to reduce turnover in 2020.
The Stay Index uses a statistical tool that ranks each question in the Annual Driver Satisfaction Survey, which Stay Metrics administers for motor carriers. Top-ranked items have the lowest scores of driver satisfaction in areas that relate to their jobs and the highest measurements for questions that show drivers’ intent to leave their carriers.
The top-ranked survey question in the Stay Index is “my compensation is fair for the amount of work I do.”
Stay Metrics analyzed more than 15,800 surveys completed by drivers in 2019 who worked at 63 different carriers across diverse sectors in the industry that include dry van, tanker, intermodal, flatbed, reefer and expedited. Its research and analytics team interpret the dissatisfaction with pay as a byproduct of reduced miles.
“Every carrier who I speak to saw their average length of haul decrease in 2019 along with driver productivity. This has been a perilous combination for retention,” said Tim Hindes, chief executive of Stay Metrics. “Drivers unsatisfied with their compensation are leaving carriers in search of more miles elsewhere, but they may not fully realize that every carrier is going through the same trough.”
Hindes attributes some of the reduction in miles as intentional. Motor carriers are reengineering their freight networks to offer drivers more home time, but larger forces at work – namely the ELD mandate and explosive growth in e-commerce – are mostly to blame. E-commerce has created the need for shorter-distance models of freight distribution, he said.
Stay Metrics also noted differences in the Stay Index by gender. Male drivers appear to be more focused on pay fairness than women drivers, who tend to focus more on the honesty and support they receive from carriers.
The company provides clients individual reports that show their own top-ranked items from their anonymous driver responses to the Annual Driver Satisfaction Survey.
“Across the board, results of the latest Stay Index show how critical it is for motor carriers to be transparent and to proactively address trends impacting their driver workforce,” Hindes said.
Driver turnover in some sectors of the trucking industry has been decreasing. Less-than-truckload carriers saw a drop in driver turnover by four points in the third quarter of 2019, according to ATA. LTL carriers hit an annualized rate of 9% – the lowest level since the fourth quarter of 2017. LTL carriers have largely benefitted from e-commerce.
In 2019 and into 2020, some truckload carriers have found solutions to keep driver wages up despite their mileage going down. Baylor Trucking, a mid-size dry van and refrigerated carrier, increased its trailer fleet by 150 units to “do more drop-and-hooks to keep drivers moving,” said Cari Baylor, president of the Milan, Ind.-based company. “We really focus on shippers that allow us to do drop-and-hooks to maximize utilization so that driver miles are not impacted.”
“We are growing, not shrinking, because we are able to take advantage of those opportunities,” Baylor added.
Mark Murrell, president of CarriersEdge, says that truckload carriers surveyed by TCA’s Best Fleets to Drive For program have adjusted their pay structures to compensate for non-driving time. Over the last two years the industry trend has been guaranteed pay programs and salaries.
“It’s getting to a point that there are not very many [carriers] that don’t have a guarantee of some sort. It might be a full salary or guaranteed ‘X’ number of miles,” he says.
Some finalists for the TCA program are paying their drivers for detention at shippers and receivers starting after one hour, he noted.
Despite average miles per driver going down by 11% in 2019, the average driver income among the 62 carriers surveyed by the TCA program increased slightly. Total driver pay went up less than 1%, from $65,149 in 2018 to $65,405 in 2019, and the average real rate per mile (including detention pay and bonuses) was $0.6177. This rate per mile is an increase of approximately 16% from $0.5219 in 2018.
Bucking industry turnover trends, the average churn rate for the 62 finalists in the Best Fleets to Drive For program dropped by nearly 15% in 2019, going from 46.37% in 2018 to 31.93% in 2019. These numbers are the raw turnover counts, which include driver retirements and other influencing factors.
Truck drivers who remember having longer hauls and less time between loads may believe that the problems they are experiencing now with fewer miles might be specific to their carrier, said Hindes. He recommends that carriers be transparent with their drivers and educate them that shorter hauls “is more of an industry issue and the chances of seeing those same miles they saw pre-ELD or pre-Amazon are unlikely.”
Despite shipment distances going down, a number of carriers have developed creative solutions to keep driver incomes afloat and are retaining them at higher rates, year over year.