6 Transportation Operating Cost Trends to Watch in 2022

There are many hot topics facing supply chains in 2022 but none bigger than the ever increasing costs that are being faced by transportation and logistics companies nationally. From ongoing COVID-19 uncertainty, to the cost of labour, equipment, and parts, to increasing facility costs, insurance, and ELDs most people are feeling a bit nervous about the future and what’s yet to come. A perfect storm is brewing in the industry and significant increases this year are inevitable.

When budgeting for 2022 and beyond, here are six key costs to consider:

1. Inflation

According to Statistics Canada, in January 2022, Canadian inflation surpassed 5% for the first time since September 1991, rising 5.1% on a year-over-year basis. Prices were up in all major sectors including transportation at 8.3% for the start of the year. Many analysts believed that this was temporary but now, some aren’t so sure with the ongoing mismatch of supply and demand.

2. Labour

The labour shortage in the trucking industry continues to be a challenge for carriers. The aging population is a major contributing factor since many drivers are nearing the age of retirement with fewer drivers entering the market. According to Trucking HR Canada, the number of driver vacancies continued to climb in Q3 of 2021 to 22,990 vacant driver positions with more than 44% of vacancies remaining unfilled after 90 days.

Companies are spending thousands and thousands of dollars on advertising costs, sign-on bonuses, and increased pay to recruit and retain new drivers. The industry as a whole is paying more for drivers with some regions seeing double digit increases in wages.

3. Equipment

Equipment, parts, and maintenance costs are also on the rise. While we may see some marginal increases in power units, trailer cost increases will be significant and are expected to average out around 20% with higher lumber, aluminum, and steel costs in 2022. That’s if you can even buy a trailer. Some manufacturers expect year long delays which means companies will be paying more for what they can get, when they can get it. Many carriers are even turning away business in certain regions because there is no equipment to service their accounts.

4. Industrial Space

With the ever increasing demand for industrial space in Canada, availability continues to decline while prices continue to soar. According to CBRE, half of Canada’s markets have essentially run out of industrial space. As of Q4 2021, Toronto, Vancouver, and Montreal each reported an availability rate of 0.9%. With declining availability and demand continuing to grow, there comes increased pricing with some regions climbing over 30%.

5. Insurance

Insurance premiums are expected to increase again in 2022 – making annual payments significantly higher for some carriers. According to Hub International, many Insurers are recovering from large claims in the industry and catastrophic weather causing rates to rise as much as 10% in 2022. The use of Telematics and ELDs will help carriers with strong safety track records reduce their risk profile and mitigate some of these costs, but the technology itself comes at a price.

6. Electronic Logging Devices (ELDs)

The ELD mandate will be enforced in Canada beginning June 21, 2022. While reputable carriers would agree that ELDs are good for the industry, they come at a cost. The annual costs are in excess of $2,000 for hardware, installation, IT integration, and recurring monthly charges for each vehicle. These regulatory changes are driving fleet operating costs even higher causing some companies and drivers to leave the industry alltogether.

Rising inflation, attracting and retaining drivers, the increase in parts, equipment, facilities, insurance premiums, and ELDs will inevitably lead to higher costs for carriers and customers alike. That’s why it’s more important than ever to work with a partner that you trust.

At Manitoulin Transport, we focus on customer service excellence and work with our customers to ensure that we remain competitive without compromising service. We have the people, the infrastructure, and the technology to help move your business forward. If you are interested in learning more about Manitoulin Transport’s services, please email us at [email protected].

Share Article

Related Articles