Road block

Features - Cover Story

A trucking industry recession has nurseries seeking shipping options for the 2020 season.

December 9, 2019

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Trucking is a historically cyclical industry, one currently on the downturn. Trucking companies cut 4,200 jobs in September, representing the third straight month of declining payrolls, according to figures released by the U.S. Bureau of Labor Statistics.

A wider industry recession led to 640 carrier businesses going bankrupt in the first half of 2019, representing more than triple the amount of bankruptcies from the same period last year, according to transportation data from Broughton Capital LLC. Sector observers studying the shipping market slowdown point to faltering freight demand following a far more fertile 2018.

What this fluid situation means for the horticulture industry’s 2020 spring shipping season is still unclear, note industry experts. While trucking has struggled in recent years with a shortage of qualified drivers, transportation-savvy nurseries can still thrive during the so-called “100 days of hell” that can make or break their bottom line.

“Nurseries don’t have transportation professionals working on staff, but they’ll do what they need to do to get their loads delivered,” says David Roush, president of KSM Transport Advisors (KSMTA), a financial advisory services firm serving the trucking and logistics segments of the transportation market. “They can reduce costs and improve their service by adopting methods that have been around since deregulation in the trucking industry.”

Questions, questions

Most growers don’t have a vehicle fleet at their disposal, creating challenges when it’s time to ship plants in spring. Considering the ongoing freight recession, nurseries this winter should review their entire transportation function, from how many trucks they annually hire out to new technology platforms that may improve routing efficiency, says Roush.

“Are they using the least cost routing technology system, or are they relying on tribal knowledge of someone who’s done their routing in the past?” he says. “How are they paying for drivers? How efficient are they at recapturing their racks?”

KSMTA recently helped reconfigure an annual grower’s full transportation division. The company hired a specialist to manage shipping and integrated new routing software into its larger transportation management system.

“Now they’re a professional transportation company, not just a shipping company,” says Roush.

Nurseries must continue to adjust amid storms within the larger carrier industry, experts say. The $800 billion freight sector slowed down this year after a hot 2018, which saw robust profits sunk into record big-rig orders and increased driver pay. Trucking companies are now dealing with softening demand and a tougher pricing environment, particularly in the spot market, where prices for last-minute transportation are more unpredictable than the contract rate truckers negotiate with customers. Spot-market prices in July fell nearly 19%, according to online freight marketplace DAT Solutions LLC.

“Horticulture has larger exposure to fluctuations in the spot market than for-hire carriers because of their need to procure a large amount of capacity in a shorter time period,” Roush says.

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A unique set of challenges

Tristan Daedalus, director of advocacy and policy communications at AmericanHort, says his organization supports the green industry supply chain in areas including transportation. Among other duties, AmericanHort provides members insight on newly enacted trucking regulations impacting nursery and agricultural products.

Growers face unique hurdles in moving goods, particularly as they’re competing in an open-market shipping space with entities transporting non-perishable products year-round, notes Daedalus. Nurseries vying for truck space with Best Buy, for example, are challenged in wooing truckers unwilling to take on their difficult-to-transfer loads.

“At a nursery, trucks are mostly loaded from the ground, as most facilities don’t have bays,” says Daedalus. “Items are perishable, so that’s limiting, and they’re dirtier, too, because they have to be open-air. Leaves and flowers fall onto the bed of the truck, so the driver’s going to have to clean it. Best Buy has easy goods to load on and off, and their stores have docks. Drivers will say they can get four loads done in a day, but only two loads from a nursery. They’ll have to charge double to make up the difference.”

Although AmericanHort hasn’t directly dealt with the trucking recession, it is fielding concerns from affiliates about rising shipping costs and other issues related to the downturn. Complicating matters for greenhouse and nursery businesses is the electronic logging device (ELD) mandate set forth by the Federal Motor Carrier Safety Administration (FMCSA).

Per the two-year-old directive, motor carriers placed ELDs in their trucks over outmoded automatic on-board recording devices, ideally improving efficiency and supplanting paper logs drivers used to record data. Though the new technology is designed to hold drivers and their companies accountable to crucial hours-of-service regulations, the mandate, combined with higher freight volumes to constrain truck capacity, has resulted in rate hikes for the acutely seasonal green product business.

AmericanHort hosted seminars to guide the industry through new regulations, offering further information on governmental exemptions for plants and other agricultural commodities. According to FMCSA, hours-of-service regulations don’t apply to agricultural goods operating within a 150 air-mile radius. If, for instance, a nursery’s plants are to be delivered within that radius, drivers can mark their shipment as “exempt” from hours-of-service strictures.

“How the federal government defines agriculture in that exemption doesn’t include horticulture, but it doesn’t exclude it, either,” says Daedalus. “The exemption would help our nurseries, because when you’re filling those logs with the government, that’s a cost to the driver. An exemption could lower costs and make drivers more willing to ship our products.”

A way ahead

Smaller growers without trucks at their disposal — and that’s most of them industry-wide — can sign less-than-truckload (LTL) contracts for small loads or quantities of freight. Daedalus knows a few direct-to-consumer nursery owners who simply contract out to UPS to haul a few dozen boxes of goods to local buyers.

Roush of KSMTA says most truckers prefer pre-loaded trailers to the more complicated process of lugging racks of plants. Although there’s some debate around the severity of the driver shortage, there’s little contention about the high average age of the existing workforce.

As stated by American Trucking Associations (ATA) in a July 2019 report, the average driver age in the for-hire truckload industry is 46. Other trucking sectors — like LTL or private carriers — have an even higher average age. Additionally, the industry has historically struggled with diversity — just 6.6% of truckers in 2018 were women.

Bob Costello, chief economist at ATA, says driver scarcity is more prevalent in the truckload freight space, where demand for shipping services remains relatively steady.

“We aren’t attracting new drivers fast enough to keep up with increases in demand,” says Costello. “This dynamic led to significant pay increases in 2018 and early 2019 — pay increases that have held fast so far, but that trend has stalled in the latter parts of this year."

Roush points to high driver turnover as well as the cost of hiring new candidates — about $11,000 in advertising, training and loss of productivity until a new driver hits the road. Even in the midst of a recession, properly credentialed drivers comfortable with the trucker lifestyle can find work, and that’s where nurseries must take advantage.

“Growers just need to have a strategy on how they will procure their capacity and make sure they have enough capacity to get through the busy season,” Roush says.

Doug Guth is a freelance writer based in Cleveland.