Wood Supply Chain Inflation Series Iss.4

Inflation’s Impact on Transport Services


What began through an acquisition of a small company and then a merger with Interstate Wood Products, which my father, Don Lemmons, started in 1966, is today, Signature Transport, Inc. Located in Kelso, WA, Signature Transport, Inc. is a 90-plus-person transportation company specializing in hauling wood residuals out of sawmills. Our companies have been transporting wood residuals in the Pacific Northwest since those early days and have seen many cycles in our economy. We have not seen this kind of inflation since the early 80s. 

The lack of available workforce has made a tight driver market even tighter. Our primary workforce is CDL truck drivers. The competition for these drivers has heated up, pushing wages to new heights. From May 2021 through January 2023, we will have raised driver wages by 40%. This must be passed on in the form of increased rates.

Additionally, while these other costs are not what you might call traditional inflation, they have the same effect. We have had to do more advertising than ever before to connect with candidates. We have also started a scholarship program, where we put the driver through school to get them their CDL and then finish their training, guiding them to driving proficiency. These efforts have been very successful but add additional cost to our operations.

Equipment has also increased in cost, if you can get it at all. The cost of the metal to fabricate has skyrocketed. The manufacturers have also had many workforce issues, with one of our suppliers being 30% short of the workers needed for their assembly of trailers. We ordered 25 trailers in May 2021 and are scheduled to get them in July 2023. The price we received at the time of order is an estimate, with the final price coming 150 days from the build. Since that time, other trailers we have purchased have been about 25% higher than identical trailers purchased a year earlier. Add 12% for Federal Excise Tax, and it’s equivalent to a 28% increase. Pretty soon, it starts to add up to real money.

Tractors we ordered last year and received this year got two increases since the beginning of the year, equaling about $10,000. Again, add 12% for Federal Excise Tax, and it’s a little over $11,000 per tractor.

Then, there is the cost of money to finance them. Rates for financing have increased 2-4 percentage points in the past year and are expected to continue to rise based on the actions of the Federal Reserve, which at the time of this writing is expected to raise rates another .75%. This will add another $9,000 to the cost of that truck over the life of the loan.

To combat this, many companies will delay the purchase of newer equipment. This is a perfectly legitimate decision, but it doesn’t come without a cost. Technicians to work on the vehicles are in short supply, and there is significant competition for them as well, again driving up wages. Outside repair shops have increased their pricing in response to the increase in Technician demand, with some exceeding $180.00 per hour.

Replacement parts have increased, and due to supply chain issues, equipment may sit for weeks to months, waiting on the parts to come in to put it back on the road.

Lastly, we have Government mandated increases. In Washington State, we have a minimum wage rule that is tied to the Consumer Price Index (CPI). We are presently at $14.49 per hour, and if CPI comes in at 8% this year, we’ll be at $15.65 per hour in 2023. This will push wages from the bottom up, putting additional stress on an already strained budget.

These inflationary pressures will make the remainder of this year very challenging. My next worry is how aggressive the Fed gets in curbing inflation, which may put us into another deep recession.

I believe the best thing all of us can do is to continuously work on ways to bring more efficiency to our operations and do all we can to take care of our workforce.