There has been a growing industry wide concern related to upcoming truck capacity and how this will affect shipping as we know it moving forward. There are many factors currently influencing this tightening of capacity, including freight demand hitting peak levels, driver shortage, as well as the recent natural disasters that have affected the flow of transportation. The real question is what does this mean for shippers and the cost of doing business.
Unfortunately, this essentially means that the window is closing on the positive environment for shippers, and rates will reflect this tightening of capacity, as exemplified by the Shippers Condition Index plummeting into negative territory. The SCI, a compilation of factors affecting the shippers transport environment compiled by a transportation forecasting firm, fell to a -3.6 reading in January. Any reading below zero indicates a less-than-ideal environment for shippers.
Why is this happening now, you may ask, as the economy is finally turning in the right direction, and manufacturing rates are increasing and forecasted to continue to do so. As the demand for freight continues to increase, more and more pressure is put on the transportation industry, and in many cases, it’s as simple as there are more loads than available trucks. With increased federal regulations set in place to improve upon safety, such as the new hours of service rules. The fleet costs are rising, and many smaller companies are unable to keep up with the cost of doing business. With them eliminated from the pool, we have less carrier availability and more demand for the ones still in business.
The Driver shortage has been a problem that has been looming for quite some time as well, and with the average age of a commercial truck driver at 48 years old, with 21 percent between 55-65 and fewer than 8% between the ages of 25-29, we don’t have enough drivers to fill the space of those who will soon be lost to retirement. The industry needs to find a way to attract more employees by either improving upon quality of life considerations or compensation or both, all of which ultimately contribute to the cost to the shipper.
National disasters such as the recent hurricanes have also affected capacity, including both loss of equipment as well as increase of need in the affected areas. FEMA and the price of gas are contributing to the skyrocketing of spot rates in these areas, which also trickles down to the rates throughout the rest of the country. With all of these potentially negative effects on the horizon, there is still a lot that can be done by shippers to continue to move their supply chain with as few negative consequences as possible.
Pre-planning FTL shipments can help to ensure your freight will not be delayed by the tightening capacity, and continuing to keep open lines of communication with your logistics providers will further ensure the best service available. It is still yet to be seen what the ultimate outcome of the tightening capacity will be on the industry, but it is always best to be educated and prepared in every situation.