November 2018 LM Viewpoint: Capacity Blues
If I were to share a single observation from this year’s CSCMP conference, it would be this: Nearly every conversation I had in Nashville touched on the motor carrier capacity crisis.
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If I were to share a single observation from this year’s CSCMP conference, it would be this: Nearly every conversation I had in Nashville touched on the motor carrier capacity crisis that has challenged shippers over the past 18 months and the related fear that it’s not getting easier any time soon.
The American Trucking Associations’ (ATA) recently released “Freight Forecast” report validates this sentiment. According to the ATA, total tonnage transported by trucks will reach nearly 16 billion tons in 2018, a figure that they believe will rise 35.6% to 21.7 billion tons in 2029. With it, truck volumes are expected to grow 2.3% per year from 2019 to 2024 and 2.2% annually for the next five years.
In the meantime, all of the elements creating the current capacity maelstrom (driver shortages, capacity imbalances, regulations, e-commerce growth and overall robust economic conditions) will continue to wreak havoc on motor carrier costs for the foreseeable future, putting more stress on carrier operations and causing multiple pain points for logistics managers.
“I don’t want to start sounding like a broken record, but this is the tightest truckload market in this century— maybe in a generation—and it’s only going to get worse,” says our veteran trucking correspondent John Schulz, who breaks down all of the market drivers starting on page 54. “Carrier executives are telling me that demand has gotten so fierce that they’re turning down freight and are becoming increasingly choosy as to which shippers they’re going to retain as customers.”
According to Schulz, in the midst of this historic sellers’ market, the advice to shippers couldn’t be more clear: Capacity will go to those shippers that are willing to work with their carriers to create desirable freight and manage expectations to help take costs out of the supply chain.
While better partnering with carriers is never a bad idea, another way to weather the capacity storm is to simply try something new. Starting on page 20, group news editor Jeff Berman shares the story of how the logistics team at Land O’Lakes decided to team up with Uber Freight to secure needed capacity on several challenging lanes in Texas.
“The Land O’ Lakes team traditionally secured capacity the way almost every other shipper goes about the process—through contracting with carriers on a longterm basis or turning to the spot market to secure capacity when needed,” says Berman. However, as capacity got tighter, the team realized they would increasingly be competing for the same space through the identical methods. It was time to break with tradition.
As Berman reports, Yone Dewberry, Land O’Lakes’ chief supply chain officer, had been watching the progress Uber Freight was making in matching trucks with loads and decided to engage with the tech platform on a pilot test. And while the company is still in the early stages of the relationship, Uber Freight is now moving 100% of the shipper’s loads between Nacogdoches and Fort Worth, Texas.
As Dewberry told Berman, the shipper was happy with the cost, communication and service levels, and is now looking to move more volume as Uber Freight builds out density in other regions.
The forecast calls for capacity to remain tight, and we’ll be watching to see how other shippers break with convention to get what they need—-at a cost and service level that keeps them in business.
About the AuthorMichael Levans, Group Editorial Director Michael Levans is Group Editorial Director of Peerless Media’s Supply Chain Group of publications and websites including Logistics Management, Supply Chain Management Review, Modern Materials Handling, and Material Handling Product News. He’s a 23-year publishing veteran who started out at the Pittsburgh Press as a business reporter and has spent the last 17 years in the business-to-business press. He’s been covering the logistics and supply chain markets for the past seven years. You can reach him at [email protected]
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