Moving Words – Operational Cost of Trucking
Timothy Brady
The American Transportation Research Institute (ATRI) has released the results of its 2023 Operational Costs of Trucking study. The research analyzes a broad range of line-item costs, operating efficiencies and revenue benchmarks by fleet size and sector.
Total marginal costs increased to their highest level for the second year in a row in 2022. It increased by 21.3 percent over 2021 to $2.251 per mile. Though fuel was the largest cause of this rise (53.7% higher than in 2021), several other line-items also increased by double digits. Driver wages went up by 15.5 percent, to $0.724 per mile, showing the industry’s continuing effort to attract and retain drivers. Driver benefits, however, remained stable in 2022.
Unusual market conditions created unique demand for acquiring and maintaining equipment in 2022. Truck and trailer payments rose by 18.6 percent to $0.331 per mile as carriers paid increasing prices, due to equipment hindrance in the supply chains. Added to this, parts shortages and rising technician pay drove repair and maintenance costs up 12 percent to $0.196 per mile.
Many motor carriers initiated improvements in key operational methodologies due to rising costs. For example, there were obvious improvements in driver turnover, detention times, and equipment utilization among nearly every fleet size and sector during 2022.
An important note: the report this year includes new metrics such as mileage between breakdowns and the ratio of truck drivers to non-driving employees to improve the overall data within the report.
Even with falling rates throughout the year, average operating margins were at least six percent in all sectors. While larger fleets’ average operating margins improved from 2021 to 2022, smaller fleets saw operating margins decline.
Conclusion:
Fuel was the greatest cost increase, jumping by 53.7% to 64.1 cents per mile. However, there were several other double-digit line-item cost increases, with percentages well above the annual inflation rate. Truck/trailer payments (by 18.6% to $0.331 per mile); repair and maintenance (by 12% to $0.196 per mile); and driver wages (by 15.5% to $0.724 per mile). Driver benefits, insurance premiums, and tire costs all experienced above average increases.
In 2021 high hauling rates helped soften the high marginal costs. However, in 2022, lowering rates caused the continued increase in costs to be a major challenge for carriers. Regardless of this difficult environment, trucking companies discovered the means to eke out operating margins of 6% or more, proving the tenacity and resilience of trucking management to find that means, no matter how adverse the economy.
For the second half of 2023 and leading into the first half of 2024 conditions of the economy remain uncertain. GDP growth was nonexistent in the first quarter of 2023. Truck freight, along with hauling rates, is expected to still soften into 2024. Shipments and spending fell in the last two quarters of 2022 and the first quarter of 2023; however, the good news/light at the end of the tunnel shows the decline moderating in subsequent quarters in 2023.
The ATRI Report along with many current freight market indicators stipulates movers need to pay attention for the near future to many economic indicators. As an example, housing starts have remained zero growth so far in 2023, plus falling more than 20 percent in the first half of 2022. Manufacturing continued to be lower at the start of the second quarter of 2023 than it was in the same quarter in 2022. Retail sales have improved more in 2023 than in 2022 (excluding price changes) but decreased from their January highs, though the tendency is falling inflation could help ease costs and increase consumer spending.
The best bet for the rest of 2023 into 2024 and beyond is to stay vigilant and don’t let your guard down. Especially when adding that 2024 is an election year and the political division is ever widening, along with how many more times the Fed is going to increase the interest rates. It’s anybody’s guess as to where our economy is going, so our best defense is a solid offense of keeping our ears to the ground. And making the necessary adjustments to our operations to remain solvent, plus being prepared to hit the ground running when inflation finally settles down.
