NFI Industries

Dedicated Transportation Outlook: 2018

As the holidays approached this past year, consumer spending hit a three-year high and truckload capacity neared 100 percent, which many shippers considered to be uncharted territory1. Although the surge from the holidays has since subsided, the capacity challenges will continue well into 2018.

This coming year, the dedicated transportation market across North America will experience many of the same conditions as the previous year. Capacity will continue to be top of mind as the industry navigates through elevated energy rates, new regulations, and the driver shortage.

Driver Shortage Looms

In a recent interview, John Larkin, managing director and head of transportation capital markets research at Stifel Financial Corp, explained that he expected 2018 to be a “trucker’s market” as drivers will still be in high demand2. The transportation industry is short about 50,000 drivers today and is expected to widen to 174,000 by 20263. Many parties, from federal governments to those who employ drivers, are working to introduce ways to address the problem such as implementing task forces to promote paid trucking apprenticeship programs across the United States. Carriers are also looking at methods to improve the driver experience and retain talent. In the meantime, the immense driver shortage has continued to affect capacity, and will also affect rates of trucking transportation in the year to come. Shippers are seeing the value in turning to a dedicated transportation partner for their expertise in recruiting, employing, and managing drivers. In addition, dedicated transportation models provide more desirable schedules and home time, allowing shippers to experience consistent capacity and to focus on their core business.

ELD Mandate Disruptions

Regulations are also changing the technology, equipment, and processes that carriers use in today’s market, and in turn, are affecting capacity. The Electronic Logging Device (ELD) mandate that was enforced this past December will impact capacity, as some carriers have been slower to comply. In fact, it is estimated that up to 25 percent of carriers have yet to install an ELD system4. Although enforcement is expected to be more lenient until April, providers who haven’t complied are risking potential delays and fines. In addition, stricter schedules and more attention on hours of service will evolve the way shippers strategize the movement of their freight and drivers to ensure compliance. Those who outsource to a dedicated fleet model should ensure that their providers continue to operate safely and remain compliant.

Energy Rates on the Rise

Oil prices have been steadily rising since this past June and global demand for barrels per day has grown to between 1.4 to 1.6 million. With energy and logistics analysts continuing to expect oil prices to continue to rise and higher rates in every mode of transportation in 2018 5, shippers will need to assess how this may affect their supply chains. Although prices will depend on the production throughout the year, analysts expect that prices will continue to grow for the beginning of 2018.  With energy costs expected to rise, shippers can partner with dedicated fleet providers to implement continuous improvement initiatives that maximize productivity and potentially offset costs in other areas of the operation.

Promoting New Strategies
To help navigate the challenges in the market, shippers are leveraging dedicated fleets to ensure capacity and stability. William Mahoney, Senior Vice President at NFI said, “Shippers will directly benefit from the investments that dedicated fleet providers continue to make to focus on utilizing the latest technologies, equipment, and human capital.” Shippers and carriers should continue to collaborate and comprehensively evaluate how to improve their operations, such as reducing empty miles, maximizing assets, and making overall improvements to their networks. In conjunction with dedicated transportation, solutions like transportation management and transportation engineering can continue to generate innovative strategies that improve cost and performance.

In 2018, dedicated transportation providers and shippers will continue to work together to evolve their operations despite the driver shortage, increased energy costs, and new regulations. Utilizing an experienced 3PL is a proactive way to ensure that supply chains remain effective regardless of market changes throughout the year.