We have been hearing about the possibility of a trucking capacity shortage for several years. While there have been sporadic shortages in specific geographic areas, for particular modes, the predicted massive shortage never materialized. This year may be different.
Two major hurricanes caused major damage to homes and infrastructure in Texas, Florida and adjoining areas. Drivers and trucks are required in these areas to transport building materials, appliances, electric grids, and other needed supplies. Some drivers will likely take construction jobs to aid with the rebuilding effort and increase their earnings.
The economies of Canada and the United States are in good shape with historically low unemployment and solid GDP growth. Then there is the Electronic Logging (ELD) Device mandate that will restrict the utilization of some trucks and push some drivers out of the industry. This unique confluence of variables is likely to make an already tight capacity situation even tighter.
What can shippers do to secure the capacity they need to keep their supply chains flowing and serve their customers? Here are two suggestions.
Sign multi-year contracts with your core carriers
Playing the spot market for carriers is fine when the freight market is slow and it is easy to do some “bargain shopping.” The opposite happens when the market tightens. Tight supply and high demand are a recipe for high rates and rate increases. To counter this trend, surround your company with quality carriers that have good service, capacity that they will commit to your company and competitive rates. Sign multi-year contracts with these carriers, whether they be over-the-road truckload, intermodal or LTL freight. While you may have to pay a few extra percentage points to secure this capacity, it will give you and your leadership team peace of mind.
Some of our clients turn to freight management companies and load brokers to cover their hard-to-move loads and shipments. While load brokers provide a valuable service, keep in mind that this approach comes at a cost. Load brokers add a markup to the costs of their stable of carriers. Trucking companies will often cover the loads of their own clients first before they make their prime capacity available to load brokers. Using load brokers may expose your company to other risks.
Heavy volume shippers may have some unique requirements. For example, one of our clients has a 24/7 operation. Carriers must drop trailers in their yard. This way they can pick a full trailer and drop an empty one and be on their way quickly. For 3PLs that service your plant on a sporadic basis, they may find carriers that show up at your dock expecting a “live load,” which can be a major disruption to your operation.
Acquire a TMS System
Make sure your company has a Transportation Management (TMS) System to help direct your shipping activity. A good TMS system can perform several important activities. Here are three issues to consider.
The shipper’s carrier routing guide can be uploaded to the TMS system. If a core carrier program has been developed, the primary and backup carrier rates, transit times and capacity levels by lane can be entered into the system. This will ensure that the shipper selects those carriers that can best meet the requirements of their vendors and customers. The TMS system can identify opportunities to consolidate shipments and/or create round trips to minimize freight costs.
When the shipments are ready for movement, the TMS can tender these shipments in an automated way to the designated carriers. If a carrier doesn’t respond within a requested timeframe, the system automatically transmits the tender to the next carrier in line until all shipments and loads are covered.
For those companies that perform these tasks manually at present, a good TMS system can remove this tedious, time-consuming, and costly work. Your transportation management personnel can be redeployed to so that instead of “fire-fighting” all day, they can deliver more added value. They can proactively manage your freight operations instead of having your freight operations manage them.
The warning signs of a capacity shortage are here. Take the necessary steps now to prevent unnecessary disruptions to your supply chain.
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