Beyond the Transportation & Logistics Capacity Crunch

Transportation & Logistics Capacity Crunch

While some transportation decision-makers recognize how supply and demand are impacting the Less-than-Truckload (LTL) marketplace, you may find that others are apprehensive to believe what is happening.

You've been hearing about the shortage of drivers, new regulations and solid demand that are driving up rates. But what else is happening in the industry?

With these additional influences, you will find it hard to ignore the current state of the shipping environment and the excuses (nay reasons) why everything seems to be going up these days.

No one factor is to blame for the current shipping environment. It’s a trickledown effect with each concern affecting the next.

1. Fleet Orders

Fleets more than doubled their orders for big rigs in May from a year ago.
Trucking companies are adding capacity to handle the growing number of shipments as rising freight prices and gains from the new tax law give them more cash for capital spending.

2. Weight/Shipment up for the 6th straight quarter in LTL

The result of a stronger industrial economy and heavier weight shipments that are coming from the truckload capacity crunch.

3. Driver Shortage

Procter & Gamble said it would raise prices because they are facing pressure from both higher prices for pulp and from increased shipping costs. “But don’t blame the truckers for higher prices of paper goods from P&G,” said Fortune.com. “It’s really a lack of truckers that’s causing costs to rise. Shippers cannot recruit truckers fast enough to offset increased demand, putting a crimp on supply.”

4. Driver Salaries

Truckstop.com said, “The easiest way to get drivers is to pay them more. And they (carriers) are.”
These pay increases and tight capacity are hitting retailers and distributors with higher shipping costs.

5. Embargoes

Unavoidable circumstances such as weather emergencies have notoriously been responsible for carriers embargoing service. What no one expected this year was the volume and number of freight embargoing occurring regardless of region.
An executive from a transportation software company recently said, “For all intents and purposes, LTL carrier networks are completely saturated and operating at full capacity.” When there is a sudden spike in demand or a sudden change requiring extra trucks, they (carriers) simply don’t have the capacity to provide those trucks to shippers.”

6. Amazon Effect

CNBC released a story that detailed how Amazon is projected to be involved in almost 50% of all US e-commerce transactions by December 31, 2018. This is a “prime” example of how this retailer is eliminating the competition and scarfing up available drivers and carriers to deliver those next day guarantee deliveries. In recent months, carriers who previously aligned with Amazon are pulling away from their partnership because their own customers suffered from late shipments due to lack of available equipment and drivers.

Does this help to accept higher than normal rates charged by trucking companies to haul loads over the country’s more than 46,000 miles of interstate highways? Probably not, but it’s a start. And the smart, innovative carriers know that if they cannot continue to deliver on expected service standards, they won’t be able to continue to charge for it.

What’s worse? Paying higher than expected freight charges and your shipment not arriving on time? Or not paying and your shipment not arriving on time? Partner with a carrier who is committed to putting their shippers first and creating capacity.

A shipper that has ramped up its recruiting efforts to hire and retain drivers and concurrently making the necessary investments in equipment to handle more capacity. Analyze and determine if you will still be a priority if your carrier partners with Amazon. Most importantly, continue to communicate with your carrier to determine mutually-beneficial strategic solutions.

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