Truck Capacity Shortage: The Past, Present and Future

Make no mistake — today, it’s a carrier’s world and shippers are living in it. From the last half of 2017 through today and beyond, a slew of market forces, some predictable and some unexpected, have combined to create a very real truck capacity shortage in the United States. It’s the realization of a warning that has been voiced for several years—perhaps so often that some shippers may have thought it was a “chicken little” myth. But it’s no fairy tale; it’s real and it’s here. For shippers and supply chain managers, adjusting their supply chain to the ebbs and flows of the economy has always been standard practice; however, navigating today’s capacity crunch may require more intervention than usual.

Today’s truck capacity shortage can be linked to several market forces, some that the transportation industry has dealt with for years and others that are new and unfolding. Now that the shortage is here, shippers are facing some hard questions. What are the real causes? How long is it expected to last? What options do shippers have for mitigating its effects on their supply chain?  

Market Review: Past, Present and Future

The past, present and future market forces causing today’s extreme truck capacity shortage include:

  • Strong Economy
  • Holiday Season
  • Winter Weather
  • ELD Mandate
  • Produce Season
  • Aging Driver Force
  • Competing Job Opportunities

Past

With a steady climb in the U.S. economy in 2017 and so far in 2018, manufacturers have been producing more goods than usual and requiring more freight to be shipped. According to recent findings, the GDP has grown by close to $5 trillion since the Great Recession in 2008. Today’s GDP is estimated to be $19.5 trillion compared to $14.6 trillion at the start of 2008 — and this growth is expected to continue. Analysts at Morgan Stanley predict that the GDP will grow by 2.5% this year

The economy’s positive effect on consumer confidence was augmented during the holiday season when U.S. retail holiday sales jumped 4.9%, the biggest increase since 2011. The increased spending was most prominent for home goods retailers and early-season and last-minute promotions, straining an already tight truck capacity. To make matters worse, uncharacteristic winter weather impacted U.S. supply chains, and reports indicate that northeastern U.S. and southeastern Canada experienced temperatures more than 18 degrees colder than typical for the season.

Present

The long-anticipated Electronic Logging Device (ELD) mandate arrived in mid-December 2017, with nationwide enforcement beginning on April 1, 2018. The mandate strengthens the ability of the Federal Motor Carrier Safety Administration (FMCSA) to ensure that drivers don’t work beyond pre-established Hours of Service (HOS) regulations. This is a good thing in terms of transportation safety and compliance, however it also tightens already limited capacity. While e-Logs have been integrated into virtually all large carriers, the mandate’s enforcement will still have a measurable impact on the industry overall, resulting in an expected 3-5% decrease in industry-wide productivity and up to a 16% decrease in the average miles per day a driver can cover.  

Southern states, such as Georgia and Florida, will seek additional capacity to transport and distribute their perishable produce throughout the country during the annual produce season. While some backhaul capacity may be available from this for shippers, carrier rates during this time will still be much higher than usual.

Future

Over and above, these market pressures and the ongoing shortage of new drivers entering the workforce haven’t helped matters. As many drivers retire, the success of trucking schools and companies to recruit replacements, and even retain existing drivers in a competitive market, has been limited. With national unemployment at 4.1% and many jobs in manufacturing and other industries available, desirable alternatives to trucking jobs remain.

What Shippers Can Do About It

With so many factors influencing this nationwide shortage, the effects aren’t expected to lessen, or even level out, anytime soon. In fact, with the impending mandate and the four-month-long produce season, the near-term shortage may get worse before it gets better — and that includes impediments like paying upwards of 10% more for freight and experiencing a lack of consistency in deliveries.

Most shippers and supply chain executives have already experienced effects of the shortage in their business and are now seeking long-term strategies for capacity. Top options for shippers include:

Positive Carrier Relationships

The first option is to build loyal relationships with carriers by being a good shipper or consignee. This means that when a driver gets to you, you’re ready to load or unload their truck and provide access to clean restrooms, lunchrooms and other helpful amenities. Carriers have so much negotiating power today that it’s critical to be known as a shipper or receiver who keeps their trucks moving and treats their drivers well. Shippers should also focus on strengthening their core carrier programs and consolidating more shipment volumes into a core base of carriers versus having many carriers that each get a small amount of freight.

Private and Dedicated Fleets

Another option is to establish a private or dedicated fleet. Of course, a private fleet will provide captive capacity that only supports your freight, but it can be an expensive option that requires your company to be responsible for equipment, driver payroll and federal regulator obligations. However, if you have the capital and competency to do it, it can be a highly viable strategy. Many shippers find that engaging a trusted carrier partner to provide a dedicated fleet offers a more affordable alternative to a private fleet. Partnering with an asset-based carrier on a long-term basis can be a win-win for both shipper and carrier; the shipper gets predictable, reliable capacity and the carrier gets predictable, reliable freight, which can also help with driver home time and similar benefits.      

Mode Shift

Intermodal transportation is another way to secure additional capacity, and is especially useful if time is not of the essence and your distance is longer. Modal changes help free up on-the-road truck capacity after your freight has been transitioned to the rail. Beyond guaranteed capacity, it can be extremely cost-effective. There are several pros and cons to consider from shifting your mode from truck to intermodal:

  • Pros: Lower costs, increased security of goods, environmental benefits, increased highway safety, more flexibility with loading and off-loading goods, additional capacity for more critical shipments.
  • Cons: Slower transportation from point A to point B, diminished reliability from multiple links in the supply chain, increased risk of damage to cargo due to the shuffling of goods, higher infrastructure costs

3PL Support

Using a third-party logistics (3PL) provider is a less intensive way to ensure capacity. Most 3PLs maintain extensive carrier networks and relationships with other shippers that share capacity. With transportation management systems (TMS), a 3PL also has access to data on different freight markets and carriers and can grant you visibility to thousands of carrier loads per day as well as provide proprietary insight on homogenized lanes and average rates for critical lanes. Beyond that, a 3PL will also handle any issues with contracted shippers, such as delays and cancelled loads. Learn other benefits of 3PL’s capacity support.

A strong economy often brings negative side effects that unfortunately impact shippers directly. The sooner shippers recognize the real and unwavering impacts of these market forces on their supply chains, the sooner they can move forward with new capacity solutions at reasonable rates for today’s new norms.

Marc Chrencik is the Director of Operations for CLX Logistics’ Managed Services. He brings more than 20 years of operational experience in logistics, warehousing transportation and material management experience to the Company, offering the perspectives of both 3PL providers and shippers. Prior to his role at CLX Logistics, Marc spent 20 years in the renewable energy and 3PL arenas.

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