Capacity Update: What’s Causing Tightening Capacity?

It isn’t ground breaking news that capacity is tight but between Mother Nature’s impacts on the east and west coasts, the new ELD mandate, and the busy holidays, it has been even tougher for asset-based companies and brokers to cover freight. While we are faced with this tight market, retailers and manufacturers are paying steep rates to keep their goods moving. We wanted to take some time to go over recent major factors that are affecting today’s capacity.

East Coast Bomb Cyclone

Bitterly cold weather that hit the northern U.S. followed by Winter Storm Grayson on the East Coast raised many concerns for shippers about transportation capacity. The storm underwent bombogenesis, which is a rapid strengthening that causes the storm’s center to have a major drop in pressure. This means that the bigger the pressure drop, the stronger the storm, and the more intense the storm impact will be. Intense impacts may be an understatement; Grayson dropped snow as far south as Tallahassee, Florida before sweeping its way up the Atlantic coast, leaving behind feet of snow and ice in its wake.

Icy roads, white outs, dangerous highway conditions, and extreme high winds all contributed to less available transportation capacity and higher spot market truck rates. Extreme cold also played a large part since truck equipment has a difficult time starting in sub-zero temperatures. Even if the roads are clear, it’s no guarantee that the trucks will start. With truck capacity already tight, the prolonged and extreme weather only made a bad situation worse for shippers.

West Coast Wildfires and Mudslides

In the later part of 2017, we saw wildfires sweep the west coast. Most recently, Southern California experienced a wildfire that burned more than 60,000 acres in Ventura County and caused several highways to close. Despite initial concerns, outbound freight endured little impact but inbound spot rates rose to incentivize drivers. The greatest impact for drivers was the need to reroute in some occasions resulting in extra miles. Additionally, the recent mudslides and flooding that followed wildfires and heavy rains resulted in additional highway closures. Impacted areas are in Ventura, Santa Barbara, and Los Angeles counties.

Driver Shortage

Driver shortage has been a topic of concern for quite some time and will continue to be for the foreseeable future. A report from the American Trucking Association notes that the industry has struggled with the driver shortage for the past 15 years and will need to hire almost 900,000 drivers in the next decade to meet rising demands. According to DAT Solutions’, at the very start of 2018 there was just one truck available for every 12 loads needing to be shipped. This ratio is the lowest it has been since 2005 after Hurricane Katrina.

Holiday Crunch & Post-Holiday Returns

While we think of the most thoughtful gifts to purchase for our loved ones, retailers and suppliers feel the pressure of getting all their products to the right place by the right time. This causes strain on all U.S. supply chains because everyone peaks at the same time. This past holiday season, the US postal service alone broke an all-time package delivery record.

However, supply chain pressures don’t stop once the holidays are over. In fact, the growing reverse logistics industry presents many problems to 3PLs and retailers as Americans return items they don’t like. All in all, pre- and post-holiday logistics have a large impact on capacity.

New ELD Mandate

As of December 18, the ELD rule is finally mandatory for most commercial motor vehicle drivers. To give you a refresher, the ELD mandate is intended to help create a safer work environment for drivers by reducing driver fatigue that leads to unsafe roads. The ELD will sync with the vehicle’s engine to automatically record drive time resulting in more accurate hours of service (HOS) recording.

What does this mean for capacity? Industry sources have predicted that shippers can expect a 4 to7 percent impact on capacity and a 5 to 15 percent increase in rates. Increased haul times for 450- to 600 -mile hauls and 900- to 1,200- mile hauls can also be expected.

Combating Tightening Capacity

Trinity Logistics offers an array of services with options to suit businesses with shipments of all shapes, sizes, and budgets. When over-the-road capacity is tight, we can help facilitate alternative shipping options.

Trinity also relies on the relationships we build with our network of carriers. Our Carrier Relations team is dedicated to helping carriers join Trinity’s network, answering questions, and studying the latest industry changes and regulations to educate carriers and Trinity’s team members. With our network of vetted carriers potentially growing every day, we can combat challenges with tightening capacity. We also work with a network of intermodal carriers, and can arrange the movement of freight that isn’t necessarily time-sensitive via rail.

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