In January 2017, we informed our readers about the warning signs that signaled an impending truckload capacity crunch. As the year progressed, the forecasted storm developed into reality, and capacity constraint has been reported as the primary issue faced by many shippers last year.
When we analyzed the data from our 2018 State of the North American Supply Chain Survey, nearly 1 in 5 respondents said they had experienced issues with capacity in 2017. In comparison with 2016, capacity issues nearly doubled.
Factors Driving Freight Capacity Conditions
Before we delve into ways that you can help reduce the impact of the capacity crunch on your supply chain, we should briefly examine the causes behind current conditions.
- Driver Shortage: The primary factor behind today's capacity constraints is the ongoing driver shortage. With more qualified drivers reaching retirement age and fewer new candidates stepping into the industry, there is increasingly less capacity (primarily in the truckload/long haul market) to go around.
To put the shortage in perspective, the American Transportation Association estimates that the industry shortage could grow to more than 174,000 by 2026. Current shortage numbers may range anywhere from 40,000 to 50,000.
- Regulations: Another industry issue that often contributes to challenges with capacity is regulatory influence. The new electronic logging device mandate (ELD), for example, may lead to even more capacity issues if carriers struggle to adopt the technology. The impact of this mandate on carriers and shippers will begin to play out as federal and state agencies step up enforcement this year.
#ShipperProTip: How will the ELD law affect your business? Read our article about the potential impact of the legislation on shippers.
- Economy: The state of the general economy also plays a role in how much freight is moved throughout the United States. Current economic conditions are better than they have been in past years, and the new tax overhaul will enable many businesses to increase output as they seek to grow market share in 2018.
Solutions To Help Alleviate Capacity Pressure
Though truckload capacity will remain a challenge for shippers most likely for the foreseeable future, there are steps that can be taken to keep freight moving.
INCREASE CARRIER POOL VIA BROKERAGE Services
If you are struggling to obtain capacity with your carriers of choice, you may consider utilizing brokerage services. Brokerage service providers may be able to provide shippers with a larger pool of carrier options than they would be able to identify by themselves.
#ShipperProTip: Identify companies that can provide asset-based transportation in conjunction with brokerage services. They may be able to offer lower rates and more reliable service when they have their own trucks and drivers available in conjunction with brokerage services.
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CONSIDER ALTERNATIVE TRANSPORTATION MODES
When capacity on the road is tightened, many shippers turn their attention towards alternative solutions, including intermodal and air transportation. Last year highlighted this point as our supply chain survey showed a 22% increase in shippers that plan to use air services and a 28% increase of those that plan to use rail services in 2018.
Each of these transportation modes has its own unique set of pros and cons that shippers will need to weigh before using. Nonetheless, when properly implemented for the right moves, intermodal and air cargo services can help shippers avoid supply chain delays associated with capacity.
In some cases, intermodal and air cargo services can even lead to better transit times and reduced overall transportation costs. Shippers may want to consider these alternative transportation modes as a topic of discussion with their service providers.
#ShipperProTip: Does the thought of the price tag associated with air cargo services make you think twice? Read our article about debunking the expensive myth of air cargo shipping.
IMPROVE SHIPPING EFFICIENCY WITH TMS TECHNOLOGY
There is a wealth of shipping and logistical data in the world. Knowing how to harness that information, however, can be very difficult. With a robust transportation management system (TMS), a shipper can maximize the efficiency of his or her supply chain.
A TMS can help shippers identify available trucks by area to book loads. This can quickly cut down the time it takes to make numerous calls to request rate quotes and available capacity. Additionally, the intelligence of today's systems improves over time with each shipment that is booked.
WEIGH THE PROS AND CONS OF A DEDICATED FLEET
Depending on the size of the business, a dedicated fleet may be a suitable option. There are a variety of pros and cons that a business should consider when looking into this option.
Utilizing a dedicated fleet can provide guaranteed capacity as needed. However, a business could become inundated by the challenge of managing its own fleet. For that reason, many companies choose to outsource dedicated fleet management to a carrier that specializes in supply chain management. This frees the shipper from having to worry about the day-to-day fleet operations so they can focus on business growth instead.
These are just a few options that shippers may want to consider as 2018 progresses. While capacity in the long haul may be constrained right now, there are solutions out there. As always, keep the lines of communication with your service providers open and don't be hesitant to ask for help when you need it.
Do you have any questions we can help answer? Let us know in the comment section below.