Is the capacity crunch coming to an end?

by George Meier
8/22/18

Is the capacity crunch coming to an end?

For the last year, shipping capacity has been incredibly tight, which in turn has caused longer lead times, higher shipping rates and plenty of other issues for shippers. After enduring months of these headaches, you might be starting to wonder if this is the “new normal” or if there’s ever going to be an end in sight. 

Historically, when capacity has been tight, carriers added drivers and trucks and within weeks or months the market would self-correct. In today’s market, however, carriers are having a hard time replacing drivers leaving the workforce, much less adding additional drivers in order to keep up with increasing demand from a thriving economy. While this ongoing driver shortage leads many analysts to think capacity will continue to be an issue, we are beginning to see a few signs that things could improve.  

Carriers are working hard to add drivers.

With signing bonuses, increased salaries and other incentives, carriers are doing their best to lure new drivers to the workforce. Some companies are even getting creative and offering more flexible working environments. At worst, these incentives should help with driver retention and stymie the wave of drivers exiting the industry. In a best-case scenario, we may see an uptick in drivers in 2019.

New truck orders have increased. 

The supply of new trucks was very strong in Q4 2017 and forecasted to be even stronger for 2018 – an estimated 60,000 more than needed to simply replace retiring trucks. Should carriers find ways to recruit drivers into the workforce, capacity could increase quickly with these trucks ready to go – and having a fleet of shiny new trucks could help with that recruiting effort.

While larger carriers are the ones who typically purchase new equipment, smaller carriers may see an opportunity to purchase used trucks and make an attempt at incremental growth. Smaller carriers typically fare better in their driver recruitment and retention efforts. 

Even if the driver shortage can’t be overcome, these trucks could help increase capacity and lower rates with their improved fuel economy, lower maintenance costs and better reliability. 

Carriers are getting more efficient.

Instead of adding capacity, carriers are learning to do more with the limited capacity they have. The use of yield management helps carriers optimize their operations for greater revenue generating hours and miles in a week. It also helps carriers select lanes that enhance the driver and fleet yield. 

Carriers will undoubtedly continue to look for ways to be more efficient. Unfortunately, industry analysts estimate that utilization is already approaching 100%. Any remaining efficiency will likely come as smaller carriers who have been late to adopt yield management software finally make the transition. 

Shippers are becoming more carrier-friendly.

In a tight market, carriers can afford to be picky about who they work with. With the ELD mandate coming into effect, a driver’s time is especially valuable, so carriers are selecting shippers that limit dwell (loading and unloading) times, build in lead time, and that are as flexible as possible with the schedule. Offering driver amenities like long-term parking, Wi-Fi, clean bathrooms and a lounge while they wait can add extra incentive for them to prioritize your load over others. 

Learning to adapt to survive. 

In addition to positioning your company as a preferred shipper, there are other ways to thrive in a tight capacity market. The first step is to work with a third-party logistics company like Freightquote to create planning strategies that can yield long-term cost savings. Plus, with a portfolio of thousands of carriers, we can find capacity where others can’t.

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