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Logistics

What’s Led to Tight Freight Capacity in 2018?

It’s no secret that freight capacity is tight in 2018. As you navigate this challenging market, however, you may be wondering what factors led us to where we are today.

A major shortage of drivers, a new mandate, high loads and even Mother Nature have all contributed in their own ways. Here’s how these factors have impacted the shipping market, truck drivers and your business, and what you can expect to see throughout the rest of the year.

The driver shortage

A shortage of drivers is still making the largest impact on capacity. According to the Commercial Carrier Journal (CCJ) Economic Outlook 2018 survey, driver availability was the top concern amongst all respondents, for-hire carriers and private fleets, with regulation being their second concern. To put those concerns into numbers, the American Trucking Associations (ATA) expects the driver shortage to hit a loss of 239,000 trucks by 2022.

While some companies have tried to make an enticing case for new graduates to become truckers by offering in-depth training and competitive benefits, it still has not quite made the impact they are looking for. Many trucking companies have also been bumping up salaries for drivers. In fact, the CCJ Economic Outlook survey also reported that nearly 40% of trucking companies expected driver pay increases to be their biggest expense increase in 2018.

When paired with the fact that a large percentage of truckers are Baby Boomers headed towards retirement, it appears as though the shortage is going to remain a top concern for the time being.

The ELD mandate

The Federal Motor Carrier Safety Administration (FMCSA) states that the electronic logging device (ELD) mandate “is intended to help create a safer work environment for drivers, and make it easier and faster to accurately track, manage and share records of duty status (RODS) data.” The ELD itself synchronizes with the engine of the vehicle so that it can automatically record driving time for more accurate hours of service (HOS).

While the benefits described by the FMCSA are well-intentioned, many drivers are against the mandate and it has only intensified the shortage. Essentially, the ELD mandate has put all truckers on the same playing field by logging – and capping – their active hours, which include driving as well as downtime from detention, refueling, and breaks. If truckers do not comply, they could face a 10-hour suspension from the road, monetary penalties, and point deductions from their safety scores.

Now that the ELD mandate is in full swing, having been rolled out in December 2017 and fully enforced on April 1st, some drivers have decided to avoid the regulations altogether and hang up their keys for good.

The growth of online commerce

By the end of 2017, Digital Commerce 360 reported that U.S. e-commerce saw a 16% increase in sales and represented 13% of total retail sales. This growth in sales – the highest increase since a 17.5% boom in 2011 – has created all-time highs for loads. And since sales aren’t slowing down, this has once again heightened the need for more trucks on the road.

Now more than ever, shippers have to be careful about how they carry out their processes. With such tight freight capacity, there needs to be a higher level of focus placed on load efficiency. Utilizing drop trailers or palletizing freight is a great way to keep the shipping process moving and make your shipment more attractive to carriers.

Other factors such as flexibility, convenient pick up/drop off windows and driver hospitality all contribute to how you can make this difficult shipping market as stress-free as possible and keep up with e-commerce.

The impact of natural disasters

When a natural disaster such as a hurricane occurs, it can set off an unexpected chain of events and delays. Hurricanes typically end up causing several trucks to be held up while waiting for flood waters to clear, which can turn into delays for unforeseeable amounts of time. Additionally, trucks are often used to deliver relief items or construction materials to help rebuild, which can further throw a wrench in their intended shipments.

Last year’s hurricanes Harvey and Irma both led to even tighter capacity than the industry had already been seeing. Before Harvey made landfall, 99.2% of available trucks were already in use. This has led to a disruption that is not expected to be fully resolved until the end of the summer.

Furthermore, there is typically a substantial amount of construction needed to be done as a result of these storms. As more construction jobs become available, a move from trucking to construction work may occur. This could be another cause for driver wages to rise.

Moving forward

If you’re feeling overwhelmed by the impact tight freight capacity has had on your business, consider partnering with a freight service provider. A freight service provider can help you analyze your current process and shipping history to give you recommendations that you may have yet to try.  Contact us today if you would like to speak with an expert and get ahead of the capacity crunch in 2018.

Editor’s Note: A version of this post was originally published on Freightquote’s blog on May 10, 2018.

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