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KEY TRENDS IN TRANSPORTATION

INDUSTRY INSIGHTS 2019

WE BELIEVE IN YOUR BUSINESS


ASSET BASED LENDING • FACTORING • TRANSPORTATION FINANCE
KEY TRENDS IN TRANSPORTATION • 1
CONTENTS
Top 5 Trends 2
Introduction 3
Research Findings 4
Optimism in the Face of Challenges 4
Key Challenges and Costs 5
Drivers Quitting 6
Understanding Contracts 7
Cost Reduction through Technology 8
Intensifying Competition 10
A Winding Road Ahead for Transportation Businesses 11
Methodology 12
About Bibby Financial Services 12
Contact 12

TOP 5 TRENDS
Optimistic About Growth Take It or Leave It
52% of transportation businesses report growth 37% report they feel they must accept contracts
and 38% expect to continue growing at +11-25% “as is” or lose business

Driver Shortage Cutting Cost with Technology


I QUIT

64% of carriers are preoccupied with finding good 1 in 3 businesses plan to invest in predictive
drivers; many are increasing pay and benefits maintenance over the next 12-24 months to
cut costs
Intensifying Competition Driving
Low Prices
66% report they’ve lost a contract in the past year
to a competitor offering prices so low they are
unprofitable

KEY TRENDS IN TRANSPORTATION • 2


INTRODUCTION
Despite the predicted slowdown of the U.S. economic growth in the first half of 2019,
over half (52%) of transportation businesses report they are growing and 1 in 3 expect to
continue growing their revenue by 11-25% in the next two years.

NEVERTHELESS, THE ROAD AHEAD WILL BE CHALLENGING.

The driver shortage continues to challenge capacity. Though the transportation industry still faces some of the
Consumers are spending more as retailers pay higher same challenges as in recent years, the overall outlook is
prices for delivery. There just aren’t enough trucks to steady for this in-demand industry. We hope that you find
keep America’s goods moving. While that’s not new, it’s this report useful and that the findings help you better
intensified by the fact that more than a third of businesses navigate your road in the years ahead.
say drivers have quit unexpectedly in the past year with
Sincerely,
42% of them citing a loss of revenue of over $10K when a
driver leaves.

This leaves trucking businesses counting every penny.


68% confirm that increasing costs are their number one
challenge—insurance, maintenance and fuel expenses top
the list. While many small fleet owners go into business
MARY ANN HUDSON
dreaming of growing their fleet, very few make it past
EVP, Managing Director
the 5th truck* and 66% of respondents say they’re losing
Bibby Transportation Finance
contracts to competitors charging unsustainable prices.
March 2019
Many trucking companies feel that they cannot influence
the terms and conditions of the contracts/loads they take
or they’ll lose business. Unfortunately, this can have an
adverse effect on the business with 1 in 3 reporting that
they’ve had to pay penalties as a result.

Trucking companies are also looking to control costs


through technology. Nearly half say ELD is the technology
that will have the biggest impact in the next three years
and listed predicative maintenance as the number one
technology to invest in over the next two years.

*ATA, American Trucking Trends 2018

KEY TRENDS IN TRANSPORTATION • 3


OPTIMISM IN THE FACE OF CHALLENGES
Growth Despite Rising Costs
Despite record high driver shortages and increasing fuel costs, business is good for
CURRENT STATE OF BUSINESS
the trucking industry. Over half of respondents said they’re growing; only a handful
reported decline. Over a third (38%) expect to continue growing and increase their
7%
revenue by an aggressive 11-25% in the next two years.

52% 41%

Disproportionate Growth
Though 52% of trucking businesses say they’re growing, fleet size is an indicator
Growing
when it comes to growth. More mid-size fleets (54%) are reporting growth compared Going steady —
to 48% of owner-operators. Owner-operators report that 44% of them are neither neither growing nor declining
Declining
growing nor declining compared to 39% of mid-size fleets.
GEOGRAPHIC REACH

Smaller Fleets Don’t Benefit from International Trade


In 2017, the US exported $282bn in goods to Canada and $243bn to Mexico. The 51% 46%
majority (67%) of these goods traveled across the borders by truck*. But businesses
with fewer than 100 trucks do not benefit from international trade—only 3% said
they operate internationally. In fact, 51% operate locally within their own and 3%

neighboring states. Local


National
Trucks move 68% of exports to Mexico*, but these are often Mexican trucks picking International
up goods at distribution centers in cities like Galveston, Texas. Many US-based
companies are concerned with security which deters them from carrying loads to
IMPACT OF PROPOSED WALL
Mexico. This may be why 59% of owner-operators and mid-size fleets do not think ON THE MEXICAN BORDER
the proposed wall with Mexico will affect their businesses. In fact, one in five believe
60
that it will be good for them.
50

40

30 59%

20

10 22%
TERMINOLOGY EXPLAINED: 15% 4%
0
Owner-operators: businesses with fleets between 1 and 4 trucks
Mid-size fleets: businesses with fleets between 5 and 100 trucks Will not affect business
Will be good for business
Will be bad for business
*ATA, American Trucking Trends 2018 Don’t know

KEY TRENDS IN TRANSPORTATION • 4


Key Challenges
Growing business comes with challenges. Increasing business costs (insurance, fuel, maintenance...) are top concerns for the
majority of trucking companies. However, business size matters—owner-operators (1-4 trucks) and mid-size fleets (5+ trucks)
each face unique challenges.

Owner-operators (1-4 trucks) Mid-size fleets (5-100 trucks)

Increasing business costs 71% Finding good drivers 72%

Keeping up with government regulations 52% Increasing business costs 67%

Competitors charging unsustainable prices 52% Retaining good drivers 66%

Finding good drivers 51% Keeping up with government regulations 60%

Retaining good drivers 43% Competitors charging unsustainable prices 48%

Cash flow issues 38% Keeping up with technology 44%

Finding new contracts / loads 37% Finding new contracts / loads 40%

Keeping up with technology 33% Not having enough time to drive business forward 34%

Not having enough time to drive business forward 28% Clients demanding longer payment terms 33%

Clients demanding longer payment terms 22% Cash flow issues 24%

Insurance Tops List of Costs TOP BUSINESS COSTS

Insurance 79%
ELDs were mandated in 2017 to ensure road safety and reduce accidents. But
more than a year later, insurance tops the list of business costs for transportation Fuel 78%
companies. Mid-size fleets feel the pinch of insurance costs a bit more than owner-
Truck
operators, with 81% of them ranking it as their top expense. Owner-operators are maintenance 67%

slightly more concerned with fuel costs (79%) than insurance (77%). Vehicle
purchasing / 50%
leasing
Staff salaries 39%

Office rent / 22%


mortgage
Contract 15%
penalties

Other 4%

0% 10% 20% 30% 40% 50% 60% 70% 80%

KEY TRENDS IN TRANSPORTATION • 5


DRIVERS QUITTING
Growth Amid the Driver Shortage
There are record high driver shortages in the US. Drivers are aging and younger
Americans are less interested in this career. The Bureau of Labor Statistics estimates

42%
the average age of commercial truck drivers in the US is 55*. It’s no surprise that
finding good drivers is the top challenge for mid-size fleets (72%). Sixty percent of
them had difficulty finding experienced drivers in the past 12 months.

Driver shortages impact mid-size fleets more than owner-operators, with the former of the businesses who reported
putting more emphasis on increasing driver pay and benefits. losing drivers unexpectedly
estimate a loss of revenue
over $10k as a result

DRIVER SHORTAGE IMPACT ON TRUCKING BUSINESSES

Increased driver pay 31%


66%

Had difficulty finding 38%


experienced drivers 60%

18%
Increased driver benefits
50%

Had one or more drivers 19%


quit unexpectedly
46%

Had to turn down contracts/ 10%


loads because a driver quit 29%

Felt under pressure and hired 13%


an unexperienced driver 26%

Lost money on contracts as 7%


a result of drivers quitting 19%

40%
None of the above
8%

0% 10% 20% 30% 40% 50% 60% 70%

1-4 Trucks
5+ Trucks

*NPR, Bureau of Labor Statistics, 2018

KEY TRENDS IN TRANSPORTATION • 6


UNDERSTANDING TERMS AND CONDITIONS
OF DELIVERY
Reading the terms and conditions of a contract is time consuming and 1 in 3 (31%) TERMS AND CONDITIONS
transportation businesses admit to either accepting the contract and not worrying OF DELIVERY
about what the terms are (5%) or just having a quick scan through (26%).
5%
75%
A third reported being caught off guard by the terms and conditions for delivery 20%
and paying penalties as a result.

The most common reason for paying a penalty is late delivery (55% of the cases)
followed by route deviation (37% of the cases). 15% of businesses report paying
$1,000 - $2,500 and 14% say they paid $5,000-$10,000 in the last 12 months.
Adversely affected
What is most concerning is that 37% of trucking businesses feel that they have the business
to accept the terms and conditions of deliveries as is or lose business. This is No negative impact on
particularly true for owner-operators: 40% feel they are in a “take it or leave it” the business

position when negotiating a contract. Don’t know

One in five businesses report they were adversely affected by the terms and
conditions of delivery. In 51% of the cases, this resulted in cash flow issues.

BUSINESS IMPLICATION OF NOT UNDERSTANDING


TERMS AND CONDITIONS OF DELIVERY

60%

50%

40%

30%
51%
20% 43%
31% 29%
10% 24% 20%
0%
Cash flow issues Lost drivers No repeat business Damage to Could not afford to Could not afford
from the customer reputation pay workforce the maintenance of
trucks

KEY TRENDS IN TRANSPORTATION • 7


COST REDUCTION
THROUGH TECHNOLOGY
Trucking businesses listed Electronic Logging Devices (ELDs) as the technology
they expect to have the biggest impact on their business in the next three years.
Despite the hype around driverless trucks, many transportation businesses see it
having an impact in the long term.

Currently, trucking businesses are interested in investing in technology that will


have a more immediate effect on reducing business costs, such as predictive
maintenance, route optimization and fleet management.

TECHNOLOGIES EXPECTED TO HAVE THE BIGGEST IMPACT ON THE


TRANSPORTATION SECTOR IN THE NEXT 3 YEARS

Electonic Logging Devices 47%


Route Optimization 28%
Predictive Maintenance 28%
Driverless Trucks 26%
Fleet Management 24%
Track and Trace 22%
Load Sourcing 21%
Traffic Jam Assistance 17%
Voice-to-Text 8%
Truck Platooning 7%
Prefer not to say/Don’t know 5%
Other 2%
0% 10% 20% 30% 40% 50%

TECHNOLOGY INVESTMENT PLANS IN THE NEXT 12 – 24 MONTHS

Predictive Maintenance 33%


Route Optimization 30%
Fleet Management 29%
Track and Trace 27%
Electronic Logging Devices 27%
Load Sourcing 22%
Traffic Jam Assistance 18%
Driverless Trucks 16%
Voice-to-Text 13%
Truck Platooning 12%
Prefer not to say/Don’t know 5%
Other 2%

0% 5% 10% 15% 20% 25% 30% 35%

KEY TRENDS IN TRANSPORTATION • 8


REASONS FOR INVESTING IN TECHNOLOGY

Transportation businesses cited cost reduction as the top reason for investing in technology in the next 12-24 months. Cost
reduction through technology is particularly important to those experiencing growth (33%). For those based in the Silicon Valley
state of California, the number one reason for investing in technology is because their clients require them to have it. Owner-
operators report that their main motivation for tech investment is to reduce cost (28%) and save time (22%). Trying to juggle
managing the business and driving the trucks is no doubt a major factor.

REASONS FOR INVESTING IN TECHNOLOGY

30%

25%

20%

15% 30%

10%
18% 18%
14%
5%
8%
6%
3%
0%
Reduce costs Keep up with Save time Customer Other Prefer not to Reduce
competition requirements say/Don’t know headcount

Technology Investment in the Top 3 Largest Trucking States


CALIFORNIA: Predictive maintenance (32%), ELD (30%), fleet management (28%)

TEXAS: ELD (38%), predictive maintenance (38%), driverless trucks (31%)

ILLINOIS: Fleet management (42%), predictive maintenance (42%), route optimization (31%)

KEY TRENDS IN TRANSPORTATION • 9


INTENSIFYING COMPETITION COST OF
OVERDUE INVOICES
New Entrants in the Industry 32% say that they are owed
between $10k and $100k in
Over half (52%) of transportation businesses feel that they are under threat from
overdue invoices and a further
new and emerging companies. This feeling is strongest among owner-operators
12% estimate that this sum is
with 54% of them expressing this sentiment.
over $100k
Businesses report that intensifying competition has led to losing contracts to
competitors who are offering unsustainably low prices (66%). Added to this, many
regular customers have requested a price reduction in the past 12 months (55%).

COMPETITION IMPACTS GROWTH


Did not take contracts/loads in the past
12 months as the payment terms were 44% 10% 44%
too long
Clients have been taking longer to pay 43% 15% 38%
over the last 3 years
Regular customers requested a price
reduction in the past 12 months 55% 12% 32%

Lost contracts/loads in the past 12


months due to a competitor offering a 66% 11% 21%
price so low they are unprofitable
Under constant threat from new 52% 16% 32%
transport companies

0% 20% 40% 60% 80% 100%

Agree Neither Disagree

Turning Down Loads with Long Payment Terms


Cash flow is tight for transportation companies due to the up-front costs—
trucks, fuel, insurance, and maintenance—long before they can invoice
customers. The strain on cash flow is worsened by clients taking longer to pay.
As a result, two in five transportation businesses say they had to refuse contracts
because the requested payment terms were too long. Mid-size fleets are pickier
when it comes to payment terms with 48% reporting that they turned down loads
in the past 12 months. Only 38% of owner-operators report the same.

A third of all companies that said they turned down contracts in the past 12
months estimate that they walked away from $10k or more in revenue.

REFUSING LOADS DUE TO LONG PAYMENT TERMS

14% 10%
1-4 Trucks 5+ Trucks
38% 48% Agree 48% 42% Agree
Disagree Disagree
Neither Neither

KEY TRENDS IN TRANSPORTATION • 10


A WINDING ROAD AHEAD BUSINESSES
FOR TRANSPORTATION GROWING:
BUSINESSES 52% of trucking businesses
say they are growing

DRIVERS QUITTING
ON THE JOB:

33% report a driver


quitting on the job
I QUIT!
42% of those who lost a driver
unexpectedly estimate
over $10k loss of revenue TOP 3
BUSINESS COSTS:
Insurance

Fuel

Truck maintenance

RUTHLESS
COMPETITION:

2 out of 3 say they have lost loads due


to a competitor offering a price
which was so low they are unprofitable
CAUGHT
OFF GUARD:

37%
report having to
pay penalties for not
meeting the terms
of delivery

55% note late delivery as


the top reason for
receiving a penalty

TOP 3 CHALLENGES
TO GROWTH:
1 rising business costs of insurance,
fuel, maintenance, etc.

2 finding good drivers

3 keeping up with
government regulations

FUTURE FORECAST FOR TRUCKING


LONGER PAYMENT TERMS: COST REDUCTION
Trucking businesses turning down loads because
customers demand longer payment terms WITH 3 KEY TECH
NEW! $ INVESTMENTS:
NEW!
INTENSIFYING COMPETITION: 1: Predictive maintenance
52% say they are under threat of new and 2: Route optimization
NEW! emerging companies 3: Fleet management

KEY TRENDS IN TRANSPORTATION • 11


ABOUT THE RESEARCH
Methodology
This report and its findings are based on in-depth interviews with clients and a survey of over 250 American transportation
businesses across the main carrier types (general freight, motor vehicle, fresh produce/meat/refrigerated food/beverages, metal/
machinery, household goods, less than a truckload, etc.). Research took place between Jan 1 and Feb 28, 2019. Participating
businesses have fleets of 1-100 trucks.

About Bibby Financial Services


Bibby Financial Services (BFS) is a leading independent financial services partner to more than 10,900 businesses worldwide. BFS
provides more than $1.25 billion in funding annually and handles $11.6 billion in annual client revenue.

With over 40 operations in 14 countries spanning 3 continents, BFS provides transportation finance, asset-based lending and
factoring solutions to help businesses grow in domestic and international markets.

Established in 2001, Bibby Financial Services supports businesses in virtually every industry. BFS is part of Bibby Line Group, a diverse
and forward-looking family business with over 200 years’ experience of providing personal, responsive and flexible customer solutions.

To find out more about Bibby Financial Services, visit:


www.bibbyusa.com

Contact
Mary Ann Hudson Milena Kodde
EVP, Managing Director – Bibby Transportation Finance VP, Senior Marketing Manager
mhudson@bibbyusa.com mkodde@bibbyusa.com

Connect with us on:

CALL US (678) 646-7821 VISIT bibbyusa.com

WE BELIEVE IN YOUR BUSINESS


ASSET BASED LENDING • FACTORING • TRANSPORTATION FINANCE
KEY TRENDS IN TRANSPORTATION • 12