The first quarter of 2014 may be behind us, but its effects have certainly not been forgotten. Although we’re now midway through the second quarter, companies (manufacturers and trucking alike) are still scrambling to recover from the unprecedented winter weather and trucking capacity crunch that has had such a hugely negative impact on the transportation industry this year.
Everyone involved in truckload shipping is continuing to feel the capacity squeeze as we approach the midway point of 2014, and it’s a complicated cocktail of causes that have combined to create this unique capacity situation that’s quite unlike any we’ve ever seen before.
During the first quarter, 390 trucking companies went out of business, taking 10,650 for-hire trucks off the road. That may not seem like very many, but to put it in perspective… there are approximately 180,000 interstate trucks licensed to haul freight in the US. Roughly 50% of those trucks belong to private fleets, meaning over 11% of America’s for-hire trucks were lost in the first quarter due to truckload carriers going out of business.
As if that’s not enough… the insane winter weather experienced across the US, particularly the “Polar Vortex,” introduced a completely different set of issues. The service delays and backlogged shipments experienced due to the nasty weather are no secret, but another factor that came into play is interesting and unexpected: part of the Q1 capacity crunch was due to intermodal (rail) shippers turning to truckload in the midst of the winter storms.
Ordinarily, the railways are a hardy and reliable form of transport in bad weather, with trains often able to keep rolling when icy highways might put trucks temporarily out of commission. However, the ferocity and never-ending pummel of winter storms had a huge impact on the rails, leaving desperate companies who normally ship all their product via rail searching for a solution. That solution ended up being shipping over-the-road, and with a sudden influx of new truckload shippers in addition to the added burden of harsh weather, spot market rates increased a staggering 20% in the first quarter!
Yet another factor contributing to the capacity issue is a truck driver shortage that is becoming more and more severe. As of March 2014, there were over 30,000 unfilled driver positions in the US. Large truckload carriers are actually going out of their way to strategically acquire smaller carriers just so they can acquire their drivers. The driver shortage has been compounding year after year, and there is no hope of a resolution any time soon.
But wait, there’s more! Recent legislation, including the new HOS regulations and the MAP-21 Act, have decreased carrier productivity by 3%-5% - and will continue to have an impact when strict equipment regulations go into effect in 2016.
So while capacity ebbs and flows, this may be one of the longest stretches of tight capacity we’re ever going to witness. The way things are trending, industry experts are theorizing that the capacity crunch will not let up any time soon, even by the end of 2014.
Now, you’re probably thinking: what can I do to avoid the financial impact of rising transportation costs and the added stress of trying to find trucks in this market?
There are two major strategies that will be vital for you to save money and effort during this uncertain time. First: if you work directly with asset-based carriers, stay away from the spot market. This is where rates are rising and competition is high. Don’t ask carriers for a one-time quote or shipment unless something fell through and you’re seriously desperate. Develop relationships with carriers and book your loads as far in advance as possible.
Additionally, you can work with a non-asset based 3PL like Trinity to feel more confident about having available equipment for your shipments. When you work directly with carriers, trying to find a truck on your own can be like looking for a needle in a haystack, but we have over 30,000 authorized carriers in our network – leave the hard work of finding a truck (and a reasonable rate) up to us. There’s no better time to turn to a 3PL than a time of tight capacity.
“Analyst says truckload contract rate hikes could easily exceed 4 to 6 percent in 2014,” DC Velocity
“Tight Capacity Pushes Trucking Conditions Index Higher,” Truckinginfo.com
“Q1 2014 Truckload Carrier Review,” Supply Chain Digest
“As U.S. trucks revved up amid train traffic jam, a capacity crisis revealed,” Reuters
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