CAPACITY WOES

CAPACITY'S TIGHT

So tight, in fact, that large trucking firms are turning away hundreds of loads per day. One of our carrier friends is turning away hundreds of EDI tendered loads (typically, contract rates and lanes) per week. So what’s going on? There are more causes than you can shake a stick at, but here are just a few:

• We’re 4 months from the USDOT’s ELD mandate, expected to remove 5-10% of capacity from an already tight marketplace.
• We’re 4 months into the FDA’s Food Safety Modernization Act (FSMA), which is shuffling the deck of carriers that food shippers risk using—shifting from owner operators to more sophisticated fleets. ATA reported in 2016 that only about 5% of the nation’s products move in temperature controlled equipment. With much of that typically being moved by owner operators, the shift to more advanced outfits, coupled by higher rates, are seriously impacting temp control markets. Making things worse for trucking - but good for our farmers - 2017 was largely a more “fruitful” growing season, further straining capacity.
• Major retailers who are trying to catch Amazon have instituted very aggressive new compliance fees, penalizing suppliers for things like late deliveries, rescheduled appointments, early deliveries, and so on. A vendor can get dinged for its carrier being late, and again for rescheduling a delivery. You can’t argue the need to pace Amazon, but restricting flexibility during a time of tight capacity - which is only expected to worsen - spells missed sales, huge fees, unhappy consumers, and a nightmare for retail suppliers’ customer service teams.

Typical reactions to capacity tightening involve shippers using more intermodal, but maybe not this time. The nation’s third largest railroad, CSX is having a heck of a time right now as it seeks to revamp its network toward higher productivity. According to Cowan & Company, “more than 80% of respondents to a CSX Service Quality survey say they’ve experienced service issues,” since the switch, and “67% of respondents have transferred freight to a trucker.” Other reports indicate Jacksonville, Memphis and Atlanta are among the hardest hit areas. Coincidentally, those markets have been toughest on truck capacity!