It is getting harder and harder for both shippers and carriers to survive and thrive with the current capacity crunch. Higher-than-average economic growth means that manufacturers and suppliers are doing more business than before, but it’s getting much more difficult to secure carrier capacity. According to the American Trucking Associations, trucking revenues were $676.2 billion in 2016 and are projected to increase by 2.8 percent in 2017, while trucks moved more than 10.4 billion tons of freight. This number is predicted to continue to rise, thanks to the e-commerce growth of 23% year-over-year and a booming economy.
The truck driver shortage is getting worse. A report from the American Trucking Associations says more than 70 percent of goods consumed in the U.S. are moved by truck, but there is a shortage of over 100,000 drivers this year needed to meet rising demand.
Natural disasters have not helped with the capacity crunch, nor has the new electronic logging device (ELD) mandate, which has put pressure on many fleets, forcing some carriers out of the market and pushing up freight rates. In a recent Journal of Commerce article, it was mentioned that record U.S. trucking rates can be attributed not only to the strong U.S. economy, but increased global economic activity, which will fill more U.S. trucks.
Results from our recent survey of the North American carrier community reveal the scale of the issue. Roughly 95% of the survey respondents—representing logistics and transportation service providers, 3PLs, freight forwarders and brokers that provide U.S. over-the-road services—expect to increase their prices in 2018.
While this may be good news for carriers, we believe that shippers and carriers can both thrive by working together to keep costs at a minimum while meeting service level requirements. Shippers and carriers can become better partners by being easier to work with, sharing information, billing and paying faster, unloading and loading quicker, and guaranteeing business for a certain timeframe.
What else can shippers and carriers do to address capacity crunch issues?
- Use digital technologies to connect carriers and shippers for better communication and collaboration.
- When shippers and carriers can consolidate LTL and/or parcel shipments into full truckload, costs can be greatly reduced because shipping one truck versus multiple smaller shipment costs less.
- Use a digital RFP management system to manage even the most complex bid invitations and evaluate them for best rates and service. Centrally handle the management of your freight contracts for best clarity.
- Pay bills on time and correctly by using a freight bill audit With nearly 40% of freight bills incorrect, auditing freight bills and paying the right price saves costs and admin time.
- Improve the experience and turnaround speed for drivers at drop-off and pick-up locations by having the carrier book time slots that align with resources to minimize deadheads. With effective dock scheduling, for example, drivers won’t have to waste their working day standing idle at each shipper’s premises or spend extra time on loading and unloading tasks.
- Use a real-time capacity and demand matching digital platform to help alleviate the capacity problem by allowing shippers to seek and find a carrier from a vetted, closed pool of quality carriers.
Shippers should hold carriers accountable and carriers should hold shippers accountable by sharing information, KPI measurements and reports. Work together to identify and implement time- and cost-saving innovations. Creating this win-win partnership can lead to continuous improvement in logistics efficiency and customer service.