Towards an Understanding of the Truck Capacity Shortage Issue
Over the past several weeks, one of the trucking and logistics groups on LinkedIn has been capturing responses to the question, “How many loads are you turning down per week due to lack of trucks?” As of a few days ago, this question had received 448 comments. I thought it would be interesting to share some of the common themes with the readers of this blog.
Load Turndowns are Not Tracked by all Carriers
The number of load turndowns by lane per week is an important KPI. This type of data can be very helpful in allocating capacity to those lanes that represent the best opportunity for strong yields. Some companies keep detailed statistics on this metric. A number of companies are not tracking this data and only have a “ballpark” estimate of the number of loads they are not able to handle. Data should be maintained on the type of freight, the lanes, the frequency of the loads and the rate to make sure that a company is optimizing the utilization of its fleet.
Load Turndowns are a Widespread Phenomenon
Many of the respondents are reporting load turndowns. Some are able to handle all of the volume that comes their way. This seems to be the case among LTL carriers. Among the respondents reporting capacity shortages, they range from a small number to hundreds of loads turned down per month for large carriers.
One sign of tightening capacity is the increase in loads being offered by load brokers. One respondent reported a tripling in the number of loads available from this source.
Capacity problems are specific to certain Industry Sectors and Geographic Areas
There is a shortage of available flatbed equipment. Loads to Canada are a problem area due to a lack of southbound loads, a result in large part of the escalation in the value of the Canadian dollar as compared to the U.S. dollar. South Carolina and upper Pennsylvania are being reported as challenge lanes due to a lack of backhaul as well.
Capacity Shortages are being Caused by Several Factors
In many cases, Carriers are allocating their precious capacity to better paying loads. Freight rates took a beating during the recession as shippers conducted aggressive bidding. Rates have been going up as business levels have been improving. It is natural for carriers to seek to optimize their revenue per mile.
Some companies are committing to move loads and then are cancelling at the list minute as better paying loads become available. This has made the tight capacity even tighter.
A lack of capacity may be a result of the timing of some loads. The problem is more acute on certain days of the week and less so on others. The CSA program is causing an exodus of some drivers that are not able to perform at an acceptable level.
Some companies are reluctant to secure more equipment until there is more economic certainty. The recent U.S. government debt crisis and this week’s turmoil in the stock market are not breeding confidence among shippers or carriers.
Load Turndowns have an Impact on Customer Relationships
This is a very valid issue that deserves discussion. What happens when you no longer handle loads from a longstanding customer or “pull the plug” at the last minute to haul a higher paying load. What happens to that relationship when shippers begin to gain confidence in working with one or more of your competitors? As carriers face the issue of to haul or not to haul, would the best approach be to speak with the customer and open up about sub-par margins before putting a valued piece of business in jeopardy?
This week’s stock market meltdown makes the current environment even more uncertain. It encourages carriers to have accurate costing models, provide high quality service and stay close to their customer base to help retain their core accounts. It challenges carriers that have been holding back on adding equipment to revisit this issue. It begs the question as to whether some selected equipment buys may help protect some loyal, better paying accounts.