Transportation and distribution companies will need smart solutions to help manage the evolving economic and workforce pressures.
“Economic pressures are likely to continue, at least for the next couple quarters,” said Grant Thornton Transportation and Distribution Industry National Leader Russell Norris. At the same time, he said companies are facing complicated workforce challenges. “I think the rising age of the workforce, especially for truck drivers, is a constant issue. You have more retiring than you have entering the workforce, and that's going to continue for the foreseeable future, as tech jobs and other opportunities seem to grab the attention of young recruits.”
What can bring those recruits into this industry? In our latest Grant Thornton State of Work in America survey, transportation and distribution industry respondents emphasized base pay — even more than the respondents from other industries — with benefits close behind.
Base pay might be the clearest way to recruit and retain workers, but companies need to find ways to balance that against their own finances.
“I think there’s a lot of pressure on companies to remain, or to try to become more, profitable,” Norris said. “That's a tough situation, if you have employees asking for more money or more benefits, so I think the challenges are going to continue.” To balance these challenges, companies will need a strategy that goes beyond base pay numbers and considers tech modernization.
Beyond base pay
“A lot of companies use pay as a recruiting tool,” Norris said. “You'll even see it posted in truck stops and on flyers.” However, most companies want to avoid a simple base-pay battle. Many look at offering incentive pay — but our survey showed that “Bonus or incentive compensation” ranked seventh out of the eight main factors that motivate workers to stay at their organization or move to another one.
It seems that companies need to find other ways to attract workers who are most motivated by pay — and one option is a well-structured per diem program. “Driver per diem programs are important,” Norris said. “I think per diem programs are attractive to drivers for a couple of reasons, but they're not always structured the right way.” Per diem programs can have tax implications that need to be accounted for within the program structure to avoid potential violations.
Another approach is to advertise the pay structures beyond starting pay. “That provides visibility and builds trust and awareness — not only for current employees, but for prospective employees,” said Grant Thornton Growth Advisory Senior Manager Alon Avdi. “It communicates what kind of pay they can expect, and how that might stack up against the market when they consider other options. That can reduce the risk of a driver leaving their truck in the middle of a route because they just found out they could make more at another company.” Pay structures also lead to another potential motivator for this industry — the possibility of advancement.
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Clear opportunities
Advancement opportunities were a secondary motivator for the respondents in our survey, and advancement is even more attractive when a pay increase is clear. “Drivers might not be angling to advance in the ranks, but they might want a pathway to becoming an owner-operator,” Avdi said. “Plus, there are key roles like logistics managers, warehouse managers, supply chain analysts, inventory control specialists, transportation ops and dispatchers — a lot of roles are essential to keeping the wheels turning in transportation and distribution.” Norris added, “it’s about retaining the employees that you’ve trained — giving people opportunities if they are willing to stay is very important.”
Employees want to see opportunities ahead, but they also need to like their jobs day-to-day. So, companies that invest in updating equipment for upkeep can also achieve returns in retention. “Companies that are providing employees with new facilities, equipment and technology are making them more comfortable or helping them,” Norris said. “That, along with the company culture, is really what drives the motivation for people to stay.” Avdi added, “if they don't have newer equipment, then they tend to have more repair and maintenance issues. That means they're dealing with downtime where they can't operate. I think that's important, too.
However, today’s facility and equipment updates often include automation — and that can have another implication for employees. Avdi pointed out, “in the survey results, base pay and benefits were clearly the top things, but also important was job security.”
Technology tension
Pushing back
In the recent dockworker strike, workers demanded a pay increase — but they also pushed back against the advancement of automation at ports. Most of the transportation and distribution sector is not unionized to make such demands, but there are clearly some who see automation as a threat — especially in a tight market.
“You have all the economic pressures on these companies and, especially if you think about the logistics space, margins are extremely compressed,” Norris said. “So, you've had facilities shut down or lay off workers.” When companies look for ways to manage those pressures, they often look at automation.
“In the near term, there can still be wins for the labor that's powering the engine of transportation and distribution, because we're relying on humans to drive the trucks and work the docks,” Avdi said. “But we know that technologies like autonomous vehicles and drones are going to be making deliveries in a bigger way over time. Maybe it's not five years from now, but certainly in the longer view you're going to see a trend toward technology.”
So, how can transportation and distribution companies modernize in efficient ways that will maintain worker support?
Finding a path forward
“Companies are continually trying to get smarter about how automation can be used in warehouses, on the docks and elsewhere, to make jobs easier and more cost-efficient,” Norris said.
While these advancements could eliminate some jobs, they can create other jobs — with other opportunities for upskilling or recruitment. “In logistics, you have some opportunities to interweave the technology aspects and recognize, ‘This is a full technology platform.’ Then, you can target some of the people coming out of school on the tech side to be interested,” Norris said.
Companies can also prioritize technology that reduces stress, to help improve worker retention. “In trucking, the driver turnover is significantly over 100%, which means you're effectively replacing your driver base on a recurring basis,” Norris said. Survey respondents said their top stressor was long hours.
For drivers and others in this industry, there might be no way to reduce long hours — but technology can help reduce the impact of long hours. “One of the most significant issues that these drivers face, especially for the ones who are sleeping in their cabs, is parking. There's not enough parking,” Norris said. This issue can worsen when companies move to electric trucks that need to be recharged during stops.
“With the hours-of-service limits, they get within an hour or so of the limit that they can drive and they have to start looking for parking, if they don't have a known spot. Helping the drivers find safe places to park can reduce that stress.” Part of that solution is to own or contract terminals where drivers can park, but part of it can also be using technology that improves route planning.
“A lot of the existing transportation management systems are old legacy on-premise systems, but they’ve started to move to the cloud,” said Grant Thornton Technology Modernization Principal Tony Dinola. As these systems move to a cloud platform and modernize, they can improve dynamic route planning — and some are even willing to reduce their fees while they make the shift. “Many of those software providers are looking for partners to help innovate their product alongside, and offering either equity stakes or reduced fees as they look to build out their products.”
Norris explained, “it's using technology to identify open spaces, but it’s also asking, ‘What relationships do we have? Are we going to lease space from those that own facilities, or what other options are there?’ I think you have to be proactive and help that driver from a dispatch or corporate office perspective, versus leaving them to solve it themselves.”
“Digital technologies like the Internet of Things and AI, with advanced analytics to optimize planning, manage fleets, predict maintenance needs — those are going to increasingly become the norm,” Avdi said.
In an industry where every employee forms an essential link in the chain, it’s important to approach technology with a strategy for its adoption. The technology that workers will welcome is the technology that helps you increase throughput, rather than decreasing staff. It’s important to modernize your operation and, if you work with your workers, they will work with you.
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