Understanding Capacity Constraints
Q: Why are capacity constraints an industry-wide issue?
A: Tightening capacity is an issue across the nation, with the industry rapidly approaching 100-percent active truck utilization. Historically, when the industry has experienced capacity constraints, we were able to purchase or obtain the extra capacity. Right now though, there is no extra capacity to purchase. That means shippers have to pay more than their competitors, or find the perfect match between a carrier that has needs in the exact lane the freight is moving.
More significantly, the capacity issue is not because of tractor truck availability. Many shippers say they pass by truck yards and see trucks just sitting there—but this is where we need to educate them. Trucks sitting in a yard is about active utilization, and for most of the larger truckload carriers, 10 percent of their fleet is sitting empty right now.
Q: What has led to the capacity constraints?
A: The driver shortage continues to be a major concern. Along with the shortage, we have an aging workforce. Research shows 51 percent of truck drivers are 45 years or older, and 17 percent are over the age of 55. We are losing drivers to retirement, and there are not enough younger drivers entering the workforce to replace them.
The driver shortage is closely followed by increased regulations. In July last year, the Federal Motor Carrier Safety Administration made changes to the Hours-of-Service standards. One of our account managers refers to this as the day the world changed in transportation—and it certainly has had an impact on capacity and truck utilization.
With increased cost pressure, bankruptcies have also become an issue in the trucking industry over the past two years. In the second quarter of this year, nearly 400 carriers had filed for bankruptcy. Fewer operators equates to more capacity being driven out of the industry.
Q: What solutions are there for shippers to deal with the capacity constraints?
A: A few solutions are available for customers. The first is using technology so a shipper can optimize shipments by its customers. The result is fuller cube and fewer trucks needed. We also explore modal shift opportunities to move shipments from truckload to intermodal, or from multi-stop truckload back to less-than-truckload, when feasible. Optimization and modal shift efforts are more easily accomplished by working with a logistics partner versus trying to coordinate independently.
Another way to address capacity challenges is to use a dedicated network to secure capacity. This provides drivers and equipment that are truly dedicated to your business. This type of operation is a growing trend as it insulates companies from capacity constraints and driver issues. Finally, it is important that shippers consider all factors under their control to become the preferred choice for their partner carriers. As demand increases and capacity decreases, carriers can now be selective in the freight they haul.