An industry calculation is that it takes a "butts-to-trucks" ratio of 3.3 to keep the tankers moving, but an acute shortage of qualified drivers poses a stiff recruiting challenge. But when ExxonMobil brought in Martin Pullman from its U.K. operations in July to manage its U.S. fleet, Pullman saw too many tankers parked in lots because of the driver shortage.
"When trucks are idle, the fixed costs for depreciation and taxes continue to mount up, plus we have the added cost of bringing in spot contract carriers to deliver the fuel," he notes.
In trucking, labor costs typically account for 70 percent of total expenses, and truck costs represent 30 percent, according to Pullman.
Pullman outsourced the recruiting process for ExxonMobil drivers to solve the problem.
The latest study from NelsonHall shows RPO growing at an average annual rate of 37 percent, with the total market projected to hit $7 billion by 2010. But Pullman’s move represents one of the relatively few RPO deals in the trucking industry. With a decade-long shortage of drivers only becoming more acute, however, more companies and carriers are likely to turn to outsourcing in the coming years.
The demand for long-haul drivers will grow at an average annual rate of 2.2 percent over the next decade, but supply will increase only 1.6 percent, generating a total shortfall of more than 100,000 drivers a year by 2014, according to the American Trucking Association.
The problem is exacerbated by extraordinarily high turnover rates in all segments of the trucking industry. Turnover for long-haul commercial drivers, who represent the for-hire segment, may run as high as 120 percent. Turnover for private carriers, which operate fleets solely for the purpose of shipping their own goods, averages 20 percent.
"We offer competitive pay and benefits, but still have attrition," Pullman reports. "When we lose a driver, we incur the costs of replacement, including significant training costs, plus the cost of using a contract carrier while the position is open or the new hire is still in training."
Reclaiming supervisory time
Before Pullman turned to outsourcing, supervisors at each ExxonMobil depot handled all recruiting. They advertised in local newspapers, distributed fliers at key driver locations and used word-of-mouth to pull in candidates.
"It diverted a lot of the supervisors’ valuable time, which would have been better spent on improving driver safety and boosting efficiency," Pullman says.
And the results were poor. For every 10 candidates ExxonMobil supervisors interviewed, only one passed all the tests and qualified for an offer.
In October, Pullman brought in MTS Driver Recruiters in a five-year deal for a full-fledged end-to-end RPO deal. Financial terms of the agreement were not disclosed. With MTS, ExxonMobil now averages seven or eight hires for every 10 interviews conducted.
"We’ve seen a dramatic improvement in the quality of the candidates they present," Pullman says.
ExxonMobil now contacts MTS with open positions, and within a week MTS presents driver candidates who then interview with the local supervisor and take a test drive. MTS now handles all screening, including drug and alcohol testing, plus the initial interview, license verification, employment checks, Department of Transportation compliance and onboarding.
Most of the candidates who survive the MTS recruiting process receive an ExxonMobil offer that is conditional on the company’s own drug and alcohol testing, medical testing and additional screening and interviews.
"Our HR department interfaces with MTS, but a lot of the administrative work HR used to do is now being handled by MTS," Pullman notes.
The supervisors’ response to the RPO arrangement has been positive.
"It’s a weight off their shoulders, and they see that the time to hire is much faster and the quality of the candidates is much higher," Pullman says. MTS has brought in 100 new ExxonMobil drivers since it signed on in October.
Pullman adds that the MTS arrangement has allowed ExxonMobil to raise the overall workforce quality. Since Southfield, Michigan-based MTS took over recruiting, the company’s safety record—measured by the number of accidents per 1 million miles driven—has improved by 25 percent.
"Some of this is the result of new safety improvements and additional training we have instituted, but it also reflects the higher-quality hires we’ve been able to bring in through MTS," he says.
ExxonMobil also has reduced its dependency on contract carriers and made progress on a long-standing objective to improve diversity through recruiting more female drivers.
"We’d had little success with that, but MTS is improving the picture," Pullman says.
Pullman believes the most significant RPO savings for ExxonMobil comes from freeing up supervisors so they can focus on coaching drivers and improving performance and safety.
Additional cost savings come from reducing dependence on the contract carriers.
"Fewer trucks sit idle," he says. "Now we are making our assets sweat."
MTS, which was founded in 2000, guarantees clients a minimum savings of 25 percent off their in-house recruiting costs and reports that savings run as high as 50 percent.
"Ninety-five percent of the cost savings come from vast reductions in non-hire screening—the money wasted on processing candidates who are not suitable," reports Ken Walker, MTS principal. "A large carrier might sort through 20,000 potential candidates to fill 200 seats."
MTS estimates that the task of filling one to three open driver positions requires 100 respondents and 130 to 176 man-hours to process them. Costs for non-hire screenings and communications are typically the largest portion of recruiting expenses.
MTS uses its proprietary database of 300,000 commercial truck drivers to cut the cost of screening unqualified applicants and to reduce time-to-hire. The database represents 10 percent of the total universe of 3 million drivers in the U.S. workforce.
The database continues to grow from MTS’ advertising and Internet scraping with a clear focus on building the number of passive candidates, who are generally better qualified. MTS fills 75 percent to 80 percent of all positions with passive candidates.
"This is the largest factor in the jump in quality of candidates we present to ExxonMobil and other clients," Walker says. "Our systems are so automated that we draw from a much smaller pool of qualified drivers. The database allows us to advertise open positions only to a specific audience. We can reach directly into the driver community in any location within a matter of hours."
MTS uses high-volume communications tools—including telephone, text messages, e-mail blasts and industry job boards—to announce open positions to drivers on the road. It also uses referral programs, career events and contacts with professional associations to build its database.
Across its entire client base, for every 10 candidates MTS sends out, 90 percent to 95 percent are hired. This high hit rate, however, depends not only on presenting qualified candidates but also on gathering detailed information about the open positions.
"We require our clients to answer a long series of questions so that we can take out all the ambiguity," Walker says. "We make clients specify the pay rate and the amount of travel required with real numbers, not broad ranges. Then we can go to potential candidates with an exact picture of the job. This puts us in position to find the magic bullet, which is predictability—the predictability of the candidate’s performance and the predictability of the nature of the position."
This close matching also reduces turnover, which for truck drivers is concentrated in the first 30 days on the job. Turnover for MTS’ hires averages 10 percent in the first 30 days, compared with the commercial segment average of 30 percent.
The trucking industry carries extremely high liabilities, and RPO can shift some of the risk onto the provider. MTS contracts hold clients harmless if MTS is negligent in screening and one of its hires is involved in an accident.
Addressing the mismatch
The ongoing shortage of truck drivers stems from adverse demographic trends and qualification barriers for applicants.
"Transportation is a special animal," Walker notes. "You have 80,000-pound trucks moving down the road at 55 miles per hour. Consequently, there is a high level of government regulation that makes it difficult for new entrants to get jobs."
The entry point for any new driver is commercial long-haul work, which takes drivers away from home for two to three weeks at a stretch, according to Walker. In the commercial carrier segment, the pay is limited by what carriers can charge for shipping. In the private carrier segment, wage scales are higher, with annual pay ranging from $35,000 to $90,000 a year. Drivers must pass through the commercial positions before they can land a job in the private carrier segment.
"That’s where all the gravy is," Walker says.
Because of high demand, commercial drivers are constantly shopping jobs.
"They are presented with opportunities on a daily basis," Walker notes. To close the demand-supply gap, the ATA launched a national truck driver recruiting campaign in early 2007, targeting ex-military personnel, minorities, women, older workers looking for a second career and workers who have lost their jobs because of downsizing.
The ATA also is pushing for more federal financing for driver training programs for ex-military personnel and facilitating a partnership program for carriers and financial institutions to offer low-interest student loans for driver training school. Until these long-term programs adjust the supply, however, the driver shortage is likely to boost RPO in the industry.