Truck Drivers, Freight Cost Increases And You. What Does This Mean For Your Business?

by Paul Schlossberg
Posted On: 9/27/2018

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Paul Schlossberg
Recently, if you've been paying attention, rising freight costs have been in the news. Companies supplying many industries, including ours, have been commenting about cost pressure due to higher freight and shipping costs. Since trucks carry 70% of U.S. freight tonnage, we should be aware that the prices we pay might be increasing in the weeks and months ahead.

Why are freight costs increasing faster than most companies expected? There is more freight to be moved over the road there are not enough drivers to do it. "Where the jobs are: Trucking companies are hiking wages as they struggle to attract younger drivers." was reported on CNBC on August 3, 2018.

The news story noted that "Some 500,000 nonlocal, for-hire truckers are delivering freight in the U.S., and the industry needs 51,000 more, experts say." Major trucking operations have been increasing wages for drivers to deal with the shortage.

The truck driver shortage was not a surprise for me, but how it came to my attention is unusual. In mid-July, in a two-week period, we drove about 2,500 miles round-trip between Austin, Texas and Lake Lure, North Carolina. We drove on three interstate highways, I-35, I-30 and I-40.

There was what seemed to be a countless number of over-the-road (OTR) trucks. It was seeing all of those trucks that tipped me off about the driver shortage issue. A significant proportion of the trailers carried recruiting advertising. Some of the ads cited specific dollar rates for drivers. Others promised good benefits. The trucking companies were looking for new drivers with ads on their OTR trailers.

Now that we all know that freight costs are rising, what should we be doing? There are a few things you should focus on:

(1) When your suppliers increase prices, do you have the ability to increase the (retail) prices at the locations you serve? If your contract language does not give you the ability to do that, make certain that you change it for future contracts.

(2) Have you thought about how to present cost increases to your clients? You must be very thorough and offer detailed information when bringing news like this to clients.

(3) After having sold it to clients, how will you sell it to the people at the locations you serve? Do not skip over this crucial step. No one likes to pay a higher price for something they buy on a regular basis. There are many things you can do to "sell" a price increase.

(4) How much will you increase prices? In vending, over the years, we moved prices in 5-cent increments. Now we have an increasing share of sales paid on debit/credit cards or with a smartphone. Micro markets give us new possibilities to deal with pricing. What if you decided to increase prices by 2-cents or 3-cents instead of a nickel? Take some time to think through the implications of such a move.

If you learn how to manage cost increases and figure out how to sell price increases, you might succeed at selling more stuff. Maybe you'll be able to sell more stuff at higher prices.




» Paul Schlossberg is president of D/FW Consulting, working with clients to merchandise and market products in impulse-intense selling environments, such as vending, onsite foodservice and convenience stores. Based in the Austin, TX, area, he can be reached at Paul@DFWConsulting.net or (972) 877-2972 or www.DFWConsulting.net.