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Truck Company Operations Cost Increased Last 2022

06/22/2023 20:27

The recent upsurge in driver wages and escalating expenses related to insurance, diesel fuels (fuel surcharge), and maintenance costs, among other factors, have led to a substantial increase in truck operating costs.

The latest report by the American Transportation Research Institute titled "An Analysis of the Operational Costs of Trucking" reveals a significant 21.3% rise in operating costs in 2022, compared to the same period in the previous year. According to the study released on June 21, the cost of operating a truck has surged to $2.251 per mile, marking a record high in recent years.

The primary factor behind the escalation in expenses during 2022 was the significant surge in fuel diesel prices, which registered a staggering 53.7% increase from the previous year. Trucking activity and trucking operations for both private carriers and larger fleets are affected by this. 

In addition, numerous other line items also experienced double-digit growth. Most notably, driver wages rose by 15.5% to reach 72.4 cents per mile, evidencing the industry's concerted endeavor to incentivize and retain skilled workers. Labor costs soared affecting marginal costs and other cost structures in place.

A multitude of enterprises responded to this competitive landscape by implementing multiple pay raises throughout the year to manage operating expenses and cash flow.

How Do the Overall Truck Company Operations Affect Truck Drivers' Benefits? 

In the year 2022, Driver benefits maintained a consistent level. This is in contrast to the significant increase in operational expenses, as reported by the American Transportation Research Institute (ATRI). The study attributed this phenomenon to a convergence of factors including the ongoing impact of the COVID-19 pandemic and other international issues.

According to Dan Murray, the Senior Vice President at ATRI, the increase in operational costs in 2022 was unprecedented. He noted that the inflation rate worldwide was only expected to be around 6-8%, yet the data revealed much higher figures. The causes behind this surge were complex and varied, making it difficult to identify a single root cause. Contract rates are affected of course so tentative agreements with truck drivers were placed.

The study revealed that the cost of operating a truck in 2022 surged by 21.7% compared to the previous year, amounting to $90.78 per hour. This hourly rate constitutes the highest cost in Ops Cost history. Notably, the increase in the price-per-hour figure surpassed that of the cost affecting the actual revenue per truck.

The Challenging Economic Climate last 2022

According to a report by the American Transportation Research Institute (ATRI), the trucking industry faced a challenging economic climate in 2022. The gross domestic product (GDP) experienced a downturn, accompanied by an upsurge in inflation during the initial two quarters of the year, which contributed to a decline in trucking rates throughout the year. Supply chain professionals are alarmed due to this economic activity.

Both federal and industry sources reported mounting costs in crucial areas. Fuel costs and fuel expenses rose significantly after Russia's incursion into Ukraine in February 2022, while truck purchase prices remained elevated despite an increase in availability. Repair and maintenance costs also escalated. Although certain costs, such as auto liability insurance premiums, stabilized, others, such as driver wages, continued to climb.

The year 2022 has brought forth unprecedented market conditions, posing distinctive challenges for the procurement and upkeep of equipment. Carriers have been forced to bear the brunt of the soaring truck and trailer payments, which have surged by 18.6% to 33.1 cents per mile owing to the impediments in equipment supply chains.

The price surge and spiking costs have been further compounded by the scarcity of parts and an increase in technician labor rates, which have led to a 12% hike in repair and maintenance costs, reaching 19.6 cents per mile. The labor market and spot market are affected.

Amidst a market that is experiencing a notable softening and where costs are rising at an unprecedented rate, the benchmarking of carriers assumes an even greater level of significance. This assertion was made by the President of NFI Integrated Logistics, Dave Broering, who further emphasized the value of ATRI's most recent operational costs report in furnishing dependable data and analysis that enables better comprehension of the underlying costs of partners in a highly volatile economy, and a marketplace that is experiencing a deceleration in rates.

It is worth noting that NFI is ranked in the 16th position on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Further Report From ATRI

According to the report published by the American Transportation Research Institute (ATRI), in the year 2022, motor carriers responded to the rising costs by undertaking measures to enhance their operational efficiency. This resulted in the stabilization of driver turnover rates, reduction in detention times, and improvement in equipment utilization across various fleet sizes and sectors.

The report also introduced innovative metrics like the mileage between breakdowns and the truck driver to nondriving employee ratio, to offer insights into the industry's performance. Take note of annual miles which is always a consideration.

Murray has affirmed that despite the double-digit hikes observed in 2022, many fleets have successfully augmented their prices while enhancing their operational efficiency to maintain cost-effectiveness and secure profits. Still, tons of freight, freight volumes, and spot freight were operational. It seems that there was no freight recession.

Drawing attention to the report's analytical prowess, Murray emphasized that profit margins for most fleet sizes and truckload carriers remained robust, ranging from 6% to 8% throughout the year. He further added that pricing strategies appeared to have mitigated the escalating costs, thereby proving to be a crucial factor in offsetting the financial burden. Thanks to the consistently improving customer base of shipper customers.

In 2022, we were fortunate to have maintained profitability and strong pricing, which allowed us to avoid the brunt of cost increases. However, early indications for 2023 suggest that we may experience a significant drop in prices while costs remain high, except fuel.

How Fuel Prices Affect the Truck Company Operations Costs

As per the Energy Information Administration's latest report, the national average price for a gallon of diesel has declined by almost $2 since June 2020. This trend may alleviate some of the cost pressures faced by the trucking industry.

Moreover, the American Transportation Research Institute's recent findings show that the average truck traveled 78,863 miles in 2022, a slight decrease from the previous year. This decline can be attributed to various factors, including growing congestion and evolving business models in the trucking industry, such as efforts to improve driver retention and work-life balance.

The adoption of alternative-fueled vehicles is gaining momentum within the commercial trucking industry. According to the latest report from the American Transportation Research Institute (ATRI), the percentage of surveyed fleets that incorporate at least one Class 8 truck-tractor powered by an alternative fuel source is expected to increase to 8.2% by 2022, up from 7% in 2021.

Among the various alternative fuel options, compressed natural gas trucks are the most prevalent at 6.2%, followed by battery-electric trucks at 5.1%. Liquefied natural gas vehicles account for 2.1%, while liquefied petroleum gas vehicles hold a 0.5% market share. Hydrogen fuel cell vehicles, which are still in the developmental phase, currently have no market share.

In Conclusion

The trucking market is always volatile that's why trucking companies should aim to minimize and manage average costs in every operation.

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