Capacity is tight across most areas of the supply chain, presenting challenges in the truckload, drayage, less-than-truckload(LTL), intermodal rail, and warehousing markets.1 Economic growth, paired with various other factors such as driver retention, continue to impact supply chains across North America. Although many areas of the supply chain are experiencing a capacity constraint, transportation capacity is a top concern as fall shipping season is around the corner.
So far this year, a strong economy has contributed to more activity including construction projects and consumer shopping, which has led to an increase in freight volume. According to the Cass Freight Index, there was a 7.2 percent year-over-year growth in shipments in June throughout the US.2
History Doesn’t Always Repeat Itself
The height of the last extended, multi-year capacity shortage for US trucking companies was in 2004 and 2005. During the mid 2000’s, the capacity shortage was followed with a freight recession; however, this may not be the case with the current shortage. Transportation experts believe that since the mid 2000’s, the deep-rooted and underlying challenges that are impacting transportation capacity will remain – regardless of the economic cycle. Compared to the previous shortage, factors such as the US economy and ecommerce have all grown, which has increased the demand for more freight. Ecommerce sales alone grew from $71 billion in 2004 to $453 billion in 2017. Aside from a growth in demand, shippers are facing challenges such as finding capacity and retaining drivers.3
Driver Retention Dilemma
The US Labor Department data showed that there are more truckers today than ever. In 2017, there were 1.7 million US tractor trailer drivers, however as freight volumes grow and expectations for faster shipping effects the market, the demand for drivers continues to increase.4 At the end of last year, the driving industry was short about 50,000 drivers.5 To help recruit and retain drivers, shippers can rely on their third-party logistics providers to continue to incentivize drivers. Companies across the board can also look for opportunities to improve benefits and resources available to their current drivers.
ELD Mandate Enforcement Aftermath
The ELD Mandate, which was enforced this past December, has ultimately shortened the distance many drivers travel in a day; this has led to lengthened transit times for shippers.6 The mandate isn’t only impacting the US market, but the Canadian market as well. Lengthened transit times are impacting cross-border freight, contributing an already tight market. Shippers are getting a first pass at the implications of an ELD mandate as Canadian lawmakers are working to get their own ELD mandate phased in through 2021.7
Supply Chain Solutions
Fall peak shipping season is on the horizon and the US economy is expected to remain strong well into 2019.8 Shippers can be proactive in forecasting their demand for additional capacity. Working with a third-party logistics (3PL) provider can contribute to a more strategic direction to meet demand, while 3PL providers can use their knowledge, experience, and resources to help keep freight moving. Whether it’s utilizing multiple modes of transportation such as intermodal and dedicated fleets, or leveraging backhaul opportunities with other vendors, 3PLs have unique relationships that can benefit the shippers involved.