- Walmart depends on its company truck drivers as well as third-party truckers to move its goods.
- Its internal team of 8,600 company drivers are among the most elite in the trucking industry, earning on average $87,500 in their first year. That’s more than twice the average American long-haul trucker.
- But that investment has paid off. In an interview with Business Insider, Greg Smith, executive vice president, supply chain for Walmart US, explained why Walmart is using its private team of truck drivers has driven efficiencies for the massive retailer.
Last year, when a truck driver shortage hit industries across the board, retailers ranging from Amazon to General Mills to Tyson Foods had to reevaluate their bottom lines. To attract more drivers to the industry, trucking companies had to boost pay, and that meant transportation costs ballooned — 71% of the nation’s freight is moved by truck drivers.
Walmart, which makes some 120,000 big rig deliveries per week, got hit by the truck driver shortage, too. In 2018, Walmart ran its first national television ad campaign to recruit more drivers, shortened the length of its onboarding process, and began offering referral bonuses of up to $1,500. They gave all of its truckers a raise last month, too.
All told, Walmart doubled its spending on truck driver recruitment last year.
But the new talent paid off for Walmart. Greg Smith, executive vice president, supply chain for Walmart US, told Business Insider that the mega-retailer has started to rely on its in-house truck driver staff over third-parties.
„With the changes that I’ve described in our system, we’ve been able to make our fleet much more competitive,“ Smith said.
In three locations that Walmart services, the company used to use third-party fleets. But it’s transitioned to its in-house fleet.
The average first-year Walmart truckers earn $87,500, more than twice the average American long-haul trucker earns. They also get up to four weeks of paid time off, full medical benefits, opportunities for quarterly bonuses, and a host of other perks that most truckers don’t receive.
That means, for Walmart, in-house truckers likely cost the retailer much more than third-party drivers. But Smith said the investment has brought back dividends.
„Based on some of the efficiency that our teams have driven in our fleet, our fleet is now more competitive and it has a better level of service in a lot of cases than we have with third parties,“ Smith said.
Smith said Walmart will continue to move more work out of third-party trucking and into the company’s private fleet. „We anticipate that we’ll continue to use, leverage the opportunities where our fleet makes more sense to be able to leverage it more to service our business,“ he added.
The way Walmart treats its truckers, Smith said, helps the retailer avoid issues that most trucking companies are grappling with. Turnover, for example, is at 94% throughout the long-haul trucking industry. Smith said Walmart truckers have low turnover.
In-house supply chain moves have become common at Walmart — and at a certain Seattle-based e-commerce behemoth, too
Walmart has been moving other parts of its supply chain in-house.
Since the summer of 2018, the $500 billion retailer has been piloting a program in which it uses its own intermodal containers, instead of going through a third-party rail company or middleman. Walmart truck drivers are also newly trucking those containers between the railway and Walmart facilities.
„When we give it to a third-party provider, we don’t necessarily have the control,“ Ken Braunbach, vice president of inbound logistics at Walmart, previously told Business Insider. „We are at the third party’s discretion of how they operate and optimize our network — whereas we have that capability when we move it ourselves.“
Amazon, too, has been cutting costs and boosting efficiencies by moving supply chain in-house. It boasts a quickly-growing network of 40 Boeing 767 cargo aircraft, more than 20,000 sprinter vans, 10,000 branded tractor-trailers, and thousands of ocean freight containers.
Other transportation companies have been taking note. J.B. Hunt, in meetings with Morgan Stanley’s transportation analyst team, said it understands that Amazon and Walmart are taking more and more of their logistics services in-house. That doesn’t just mean losing business, „but also potentially competing with some of their customers, over time.“
„Our business is growing very effectively, so that means expansion and growth,“ Smith said. „We are making ourselves much more cost-competitive, which means the opportunity to pick up additional business that we haven’t in the past.
„We will continue to use some of our very valuable partners to work with us, but our options are much more expanded today than they were a year and a half to two years ago — because of a lot of the changes that we’ve been making to make ourselves much more efficient in the way that we operate,“ he said.
Source: business insider