Transportation capacity problems have been a volatile issue over the past twenty years or so. A thorough analysis provided by the Council of Supply Chain Management Professionals (CSCMP) in its “State of Logistics” report, indicates that by 2017,shippers in the U.S. will face shortages in trucking resources again, predominatly a trucker shortage, in the near future due to an array of developments that may cause shippers to find loads left on the ground, shipping costs rapidly escalating, and shrinking profit margins that stun stakeholders.
Contributors to Capacity and Trucker Shortage
The 2014 winter weather triggered a trucking capacity problem. And, new regulatory changes establishing no less than twenty new rules, each either already in effect or in the process of enactment, will further impact capacity throughout the U.S. The new regulations include implementation of electronic logging instruments, speed-limiting and other equipment, more stringent alcohol and drug testing for drivers, and other increases in CSA restrictions. The stricter regulations promise to effectively diminish the number of available drivers and trucks, and available time for turns. Noel Perry, economist and trucking industry expert, predicts a reduction in the nation’s trucking force by 700,000 drivers. This adds to the existing insufficiency in numbers of new drivers coming into the industry to replace retiring drivers and thus a massive trucker shortage.
In the past, according to Perry, trucking capacity has been somewhat consistently maintained at about 90%. In 2014 utilization was 100% of capacity, a crisis phase. Currently, the U.S. is running at approximately 95%. However, based on Perry’s estimates, by 2016 that rate is likely to escalate to the 2014 rate. These indicators mean that customers will be unable to get service in many cases, unless the trucking capacity shortage is offset by reduced demand due to a downturn in the economy.
The American Transportation Research Institute has already identified a problematic decline in trucking capacity over recent years. (2009 was an exception due to the 2008–2009 recession.) At the current rate, the disparity could reach a trucker shortage of nearly 250,000 drivers over the next seven years. The current Shippers Condition Index (SCI) published by the FTR forecasting firm evaluates market influences impacting shippers. Its Trucking Conditions Index (TCI) indicates oncoming increases in pricing and service shortages due to current capacity issues. FTR’s Director of Transportation Analysis, Johnathan Starks warns that that the problem can be expected to intensify later this year if the economy strengthens. Stark explains that both contract rates and spot rates are increasing, and the fourth quarter shipping season will likely exacerbate the situation.
Strategies for Surviving the Capacity and Trucker Shortage
Rates are likely to increase between 4% and 9% by year-end 2016, per Don Broughton, economist and industry expert, Avondale Partners. Shippers should budget and price accordingly. Many customers who grappled with the 2014 situation, are now strategizing to head off the future issues by securing resources in advance, establishing longer-term agreements with carriers. Contracting assures shippers of the capacity they need and assures carriers of the reliable volume and consistency that promotes optimal productivity and service quality. Here are additional priorities in planning for capacity shortage.
- If you’re not equipped with personnel and systems to manage through a shipping resource shortage, you may consider employing 3PL transportion management experts to handle logistics.
- Strive to accomplish a strong evaluation from carriers. Competitive rates and reasonable fuel surcharges are essential.
- Set favorable payment terms and timeframes. Paying under 30 days is a good way to distinguish your company with carriers.
- Coordinate inbound and outbound shipments to align with your carrier’s routine, when possible, to build a more mutually beneficial relationship with your carrier.
- Facilitate quick, smooth pickups and deliveries by keeping loading areas accessible and bays clearly marked. Ensure that loading is managed efficiently to prevent excessive dwell time at your facility for the driver.
- Preferred shippers maintain complete, detailed communications about each freight load with carriers. Modify pick-up and delivery policies to maintain a level of flexibility that makes sense to help drivers accomplish their work.
- Further, think in terms of aligning your business objectives with the carriers’ own practical interests to improve service the carrier can provide your company and to build a strong professional relationship.
- Schedule loads throughout the month instead of squeezing all shipments into a short period monthly. This permits carriers to efficiently schedule more loads. Providing an annual plan, if feasible, assists carriers in adjusting to market changes and maintaining service reliability, and builds your company’s reputation for reliability to honor commitments.
- Implement a Transportation Management System (TMS) to comprehensively manage logistics surrounding and including the shipping function as well as related performance metrics. Such a system affords a strong competitive advantage to shippers.
- Combine one-way hauls into round trip hauls, when possible. Also, utilizing less-than-truckload (LTL) affords savings. And, facilitating backhaul loads with your carrier offers savings for your company and builds a strong working relationship with your carrier by helping reduce empty miles and increasing the carrier’s service capacity.
Supply chain and transportation coordinators are acutely aware of consequences in delinquent deliveries to customers, and savvy shippers have discovered the above time-tested methods for successfully managing through periodic (or perhaps a long term trucker shortage) shortages in trucking capacity. Certainly, based on the current apparent consensus among industry experts, successful shippers will be those who adapt as necessary to meet the widely predicted upcoming challenges in ensuring resources to meet delivery commitments.
The author of this post is Steve Norall. http://cerasis.com