Trucking firms face higher costs, too
Produce suppliers in Michigan and throughout the industry are struggling to cope with ever-increasing freight costs.
Some share horror stories of shipping charges that have doubled compared to a year ago.
But as much as freight costs have skyrocketed, trucking companies aren’t raking in windfall profits, said Josh Rhodes, vice president of transportation for Grand Rapids, Mich.-based Split Rock Supply Chain Solutions.
“It’s a tough market now,” he said. “It’s not easy for us, either.”
The company runs 120 trucks and hauls primarily produce from growing areas that include the western seaboard, Arizona, the Rio Grande Valley and Idaho.
Just the process of purchasing a new truck or trailer can be a challenge, Rhodes said.
“We have a good dealer network in our area,” he said. “But they’re only allotted so many spots from the manufacturer.”
Likewise, dealers’ customers, such as Split Rock, are only allocated so many spots.
Until recently, even when customers were able to able order trucks, they didn’t know when the trucks would arrive.
It could be six or nine months, Rhodes said. Or sometimes the order could be canceled.
The challenge was especially significant for Split Rock, because the company runs a newer fleet than many transportation firms.
“Our oldest truck is three years old,” said Rhodes, who has been with the company 22 years.
When the vehicles arrive, multiple surcharges typically are added to the invoice as a result of higher steel or aluminum prices or increased prices of parts.
Rhodes said the price of a truck is up more than 20%, and trailers cost 20% to 30% more compared to a year or so ago.
He does not expect prices to come down, even if the cost of building a truck falls.
“I think for now, this is the new normal for us,” he said.
It’s still tough to get ahold of trucks, trailers or refrigeration units, he said, but at least orders are becoming “more predictive,” with trucks arriving from the manufacturer close to the date promised.
For the most part, Split Rock has been able to meet its delivery commitments to its customers, Rhodes said.
“We’re pretty locked in with contracts,” he said.
The company also has a third-party logistics division.
“If we can’t haul a product on one of our assets, we’ll ask the shipper if it’s all right if we find them a truck through our brokerage,” Rhodes said.
But unlike a contract price, the open-market price can vary.
“It’s based on that spot market for that day,” he said.
Freight rates have to support the increased costs of equipment, fuel, insurance and labor, Rhodes said.
The price of diesel fuel alone has increased 80% over the past year.
“We’ve increased our driver wages multiple times over the past couple of years so we can keep our top-tier drivers here,” he said.
