NASSTRAC speaker cites how market and capacity conditions can factor into modal selection

A balanced United States transportation market has been highlighted fairly often of late. But since 2009 business activity has continued to increase and been steady while capacity has not changed materially.

This observation was laid out by Shelley Simpson, Chief Marketing Officer-EVP, President of ICS at J.B. Hunt, at last month’s National Strategic Shippers Council (NASSTRAC) Annual Conference.

“If you look at the number of trucks on the road you really need to go back 2004 to get about the same number of trucks purchased as there were in 2011,” she explained. “But capacity has remained the same and shipments continue to move forward and you are starting to see pockets in the industry particularly where seasonal demand will happen and where people may look for alternative modes of transportation.”

That development, coupled with rising fuel costs since 2004-2005, said Simpson, has been a key component of supply chains and led a lot of shippers to really think about intermodal as a significant way to curb costs and cost increases that happen. That is how it was viewed initially and now, she noted, it is more of a new wave in the industry and shippers have moved to it and become more comfortable and see how much the industry has spent from an intermodal perspective so that intermodal has really shortened its length of haul by about 250 miles from 2,000 miles to about 1,750 and therefore truckers length of haul has gone from about 800 to about 600 miles in the last 5 years.

What this really means, explained Simpson, is that the larger carriers have reduced their total truck count available in the marketplace by about 60 percent over the last 5 years.

“We see small- and medium-carrier capacity really coming into play as a more viable option, and we then see more shippers moving into the 3PL space and brokerages—and a movement into intermodal and small carrier capacity using 3PLs inside both of those spaces over all,” she said. “So you think about what is left. We believe the large carriers will be very focused on shorter length of haul where they can run a consistent regional network in areas where intermodal is not a good option and also where they can attract drivers to get the proper return on invested capital with utilization.”

Simpson also pointed out that medium-sized carriers are likely to follow the same path as they have been historically focused on more of a regional freight mix overall and that a seasonal surge that happens in the marketplace for any longer length of haul shipments will move to smaller carriers over time and primarily through 3PLs.