How to Handle Tighter Shipping Capacity

From Austin Consulting

For the last several years, truckload capacity has been on the minds of nearly every shipper. Issues they are hearing and facing include fewer trucks, fewer drivers and tightening capacity. But what does that really mean and how does it affect your business?

Some factors that are driving the capacity issues include:

  1. The economic recession hurt a lot of trucking companies. This put many smaller companies out of business and caused a lot of other companies to cut down on trucks and drivers.
  2. Increased regulations have hurt trucking companies, as well. These regulations are meant to increase safety, but in some cases have been detrimental to driver production.
  3. A massive driver shortage. CNBC stated in an August 2014 article that there are 30,000-35,000 unfilled driver jobs in the U.S., with more and more drivers retiring every day. And let’s not forget – driving a truck isn’t exactly at the top of most young people’s career choices these days.

To make truckload capacity matters even worse, when customers react to a truckload shortage, they look at other shipping modes and the most popular is intermodal. Intermodal is a great way to ship products long distance – it’s cheaper than an over-the-road (OTR) truck and it doesn’t really take any more planning on your part. The downside is that intermodal takes more time to arrive – in some cases 3-5 or more business days than OTR.

So, when truckload freight shifts to intermodal at a higher rate than normal, that causes an intermodal capacity issue. As rail yards try to keep up with the increase in demand, this stretches their networks and causes delays. Not to mention that there is a current shortage of rail cars in the U.S., which makes matters even worse.

It’s almost too overwhelming. So, from a shipper’s perspective, how do you solve this issue?

Well, the short answer is – these is no outright solution. The key to any good supply chain is proper planning, but even the best laid plans go awry sometimes and you have to adapt.

The best solution is to use reputable truckload and intermodal carriers and partner with them. Use a standard group of carriers and work with them to achieve mutual success. Too many companies out there treat carriers as if they were a dime-a-dozen (“one late shipment and you’re out!”), but that’s not effective anymore. Playing the interchanging carrier game not only results in issues for you, but also and more importantly, your customer. No one wants to have an upset customer.

Working with your carriers will help them plan their assets and, in turn, that helps them service you better. Also, when capacity gets tight, a carrier that you help out when capacity isn’t an issue is more likely to help you out when things look rough.

Tight capacity is an issue that isn’t going away anytime soon, so plan correctly and you’ll keep yourself and your customers happy.