We are over halfway through 2022 and moving farther away from the impacts of the pandemic. Schools are reopened, and people are beginning to travel again. The return and growth of demand for transportation services are promising for the industry, but with rising costs, it is important to keep up with industry trends to stay profitable. Here are five things transportation companies should focus on as we move through 2022:
VOLATILE GAS PRICES
Gas prices hit an all-time high this summer. Minnesota’s average price per gallon was $4.071 as of August 4, 2022, and expert economists predict gas prices will remain volatile. Any disruptions to oil supply lines – such as hurricanes or continued sanctions in Russia – can cause spikes in gas prices,. Conversely, oil production from the U.S. and other OPEC members is expected to pick up in the coming months, which may help lower gas prices. Transportation companies need to plan to handle these changes because of the unknown nature of the exact direction gas prices will go.
Ways to prepare for volatile gas prices:
- Evaluate current routes to determine profitability.
- If you identify unprofitable routes, consider consolidating, cutting, or taking different ways that may result in better fuel efficiency.
- Convert vehicles to alternative fuel or electric vehicles where possible to help lower fuel expenses for the long term.
IMPROVEMENT OF TECHNOLOGY
The industry has continued to adopt new technology to generate growth and minimize costs. From the corporate offices of transportation companies to the vehicles themselves, technology has been improving. Corporate offices are beginning to employ many software programs to help make their operations more efficient. Vehicles now have far better technology to track trips and fuel efficiency and provide remote control features. The transportation industry continues to have opportunities to evaluate its technology strategies and assess if it meets the company’s needs and continues to explore new ways to build. The opportunity and need to explore new ways to develop and adopt technology has never been greater. Contact Smith Schafer’s Technology Services Group to schedule a consultation.
WORK FORCE ISSUES
The transportation industry faced a labor shortage well before the pandemic began. As driver shortages continue to increase into 2022, optimal recruiting and onboarding processes will be critical. We have seen transportation companies re-thinking driver benefits and wellness initiatives to stimulate employment. Voluntary and group benefits are being added to attract and retain quality drivers. On-the-road benefits will continue to be critically important.
Consider switching to hiring through an external talent acquisition company to make the hiring process less of a headache. With the larger pool of people applying through these acquisition companies, it may be easier for them to find people who possess the required skills and are a better fit for your company.
Create a plan for what your future workforce may look like and set up programs to help meet these future goals. For example, work with students at local schools to get them excited about your industry and let them know your business is an option for their future.
CHANGING TRANSPORTATION LAWS
Two new law changes by the Federal Motor Carrier Safety Administration (FMCSA) may cause significant changes to the transportation industry.
- In February 2022, the FMCSA created a new Entry-Level Driver Training (ELDT) that individuals must complete before receiving their CDL. This action may make getting the CDL harder, but those who get their CDL will be better equipped for the job.
- The FMCSA created an under 21-year-old commercial driver pilot program that President Biden approved in January 2022. The Safe Driver Apprenticeship Pilot Program (SDAP) allows 18 – 20 year old drivers with CDLs to travel interstate routes instead of only being restricted to intrastate routes. The apprenticeship requires the young drivers to drive 240 hours under the supervision of an older driver in a vehicle equipped with safety features. After 240 hours, the young driver can drive cross-country. This act could open the transportation industry to a new demographic of drivers.
The pandemic has taken a toll on many transportation companies. Some owners are considering selling their business or consolidating. While negotiating a merger or business sale, it is helpful to conduct a valuation. There is more to business value than simply your balance sheet today. Your goal should be to ensure you get the best purchase price, even during the current crisis.
In addition, considering that roughly $68 trillion is set to be passed down from Baby Boomers to their beneficiaries over the next 10 years, it is clear that succession planning must be assessed sooner rather than later. This includes deciding whether to sell to an external party, pass the business to a relative, or a member of management. Be aware and prepared for all the financial and tax impacts these options provide.
While not an all-inclusive list, these trends and takeaways should help you manage your profits and stay ahead of competitors. Success for the rest of the year can be achieved through continued dialogue with your team as the landscape evolves.
Our transportation industry experts stay on top of changing trends and leverage years of experience, relationships, and continuing education. Smith Schafer’s specialization allows us to efficiently and effectively provide services tailored to our client’s needs.