Courtesy of Transfix
Transfix CEO Drew McElroy.
- The truck driver shortage has dominated America's headlines in the logistics space this year.
- However, Transfix CEO Drew McElroy said the driver shortage isn't the only thing that's dragging the industry down.
- With billions of miles being driven empty every year and technology like GPS not being widely implemented, McElroy said the trucking industry can be "incredibly wasteful."
The US will be short 175,000 truck drivers by 2026, according to the American Trucking Associations. Fewer drivers mean that fewer goods can be moved in a timely fashion, which limits companies from selling more and consumers from enjoying what they're used to finding in stores or online.
Today, a lack of drivers is already delaying orders and making goods more expensive as freight rates climb.
But not everyone agrees that the shortage is the only thing constraining the trucking industry, which moved 64% of all freight shipments in 2015.
Drew McElroy, CEO and co-founder of Transfix, a New York-based freight brokerage startup, agrees that there's a constrained supply of drivers and trucks alike as the economy has improved. However, there are deeper causes to some of the delays we've seen in recent months.
"There may not be enough drivers, but there also is certainly not enough efficiency of those drivers' time," McElroy told Business Insider. Transfix, founded in 2013, has raised around $80 million in funding, making it one of the most robust supply chain management startups around.
McElroy, who has worked in logistics for more than a decade, said trucking can be an "incredibly wasteful" industry. Billions of miles are driven every year with nothing in them, many drivers spend hours at shipping docks, and the traditional way of brokering freight through phone, fax, and email is inefficient.
And not only do those factors make the industry less efficient, they make the already-stressful job of trucking that much more burdensome on drivers.
"If you can get more intelligent about execution, you create a situation that's a win-win for everybody," McElroy said. "You create value simply by eliminating waste."
He highlighted three things that are hampering trucking companies outside of the driver shortage.
1. Truckers often end up driving empty trailers
Nearly 20% of miles are driven with empty trailers, or "dead-head." Every year, that adds up to 65 billion empty miles, according to McElroy's estimate.
Often truckers, particularly ones who drive for small businesses or independently, may not have a shipment lined up after they've dropped one off. They might wait a while for a well-paid job to open near them, or drive for several hours to get the next shipment.
That could be solved if drivers were notified of new jobs at their destination before they even get there.
With Transfix, for instance, a driver who drives from Chicago to New York every week might be pinged while moving through Harrisburg, Pennsylvania about jobs in New York - eight hours before he or she arrives.
2. The majority of drivers spend three or more hours at shipper docks every time they arrive
Per industry standard, drivers are expected to wait up to two hours at shippers to be loaded or unloaded. They're not paid for that time.
But almost 63% of truck drivers say they wait three hours or more every time they're at a shipping dock. Companies often don't coordinate their freight with the driver's arrival and might not even have people on hand who can load the freight.
And McElroy said that shippers often have little handle on just how much they're detaining drivers.
"If you say to a shipper, 'Okay, you have 10 distribution centers, tell me the average loading and unloading time of a truck in all 10 of those for the past year,' they'll have no idea," McElroy said.
"If they try to find it, I kid you not, they're going to call their guard shack and say, 'Send me the log book,'" McElroy added. "That's how these companies keep track."
Paying drivers for detaining them for more than the two-hour limit (of course, that payment often doesn't happen) can be costly. By implementing more efficient policies, shippers can save money by simply not keeping drivers waiting - and then drivers can actually, well, drive.
"We can go to shippers and say, 'Listen, if you put on an extra eight hourly workers at the cost of $1,000 per week, we just saved you $20,000 in trucking detention,'" McElroy said.
3. Brokering a shipment between the truck driver and the shipper takes hours
The logistics industry isn't known for its breakneck speed in adopting new technology. It's still perfectly common for freight brokers, who arrange shipments between truck drivers and shipping companies, to coordinate shipments via phone, email, and fax.
The process takes two to three hours, McElroy said. This includes the broker winning the load, putting it in the load board, finding drivers, negotiating rates on both sides, and then billing and collecting.
Additionally, phone brokers will call the truck drivers every 15 minutes during the broker process to ensure that the driver is still en route to the delivery or pick-up location - rather than just having a GPS-enabled tracking process.
It's timely and pricey, though. McElroy estimates that traditional brokers account for 15% to 18% of the end price of a freight rate.
New freight brokerage sites, like Transfix, Uber Freight, and Convoy, lessen that. On one's smartphone or computer, truck drivers can browse jobs based on their location and pay, and then pick what best fits their needs.
Transfix only needs 30 minutes to process a freight shipment, McElroy said.