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Capacity Crunch Factors: What Causes a Capacity Crunch?

Capacity Crunch Factors

Unbelievably, the capacity crunch is back in the shipping headlines. In April 2017, William B. Cassidy of the Journal of commerce (JOC) noted shippers were expecting a forthcoming slight capacity pinch, but that was before hurricane season arrived. Now, the shipping and transportation industry faces unprecedented capacity problems, and the upcoming ELD implementation deadline will exacerbate the issue. However, the current capacity crunch is an opportunity to educate more shippers about capacity crunch factors, and understanding these factors will help shippers enjoy continued success throughout a capacity crunch and prepare for the capacity crunches of the future.

Capacity Crunch Factors Include Increased Deadhead

Lacking shipping standards and a misconception about the urgency of getting drivers in and out of shipyards faster are common capacity crunch factors. Increased Deadhead, including increased 12 time in a shipping yard and empty halls on return trips lead to increased costs for carriers. Although this may not seem like it in impact to shippers, carriers eventually note lost profitability and reduce fleet sizes, enacting leaner processes, explains Lawrence J. Gross of JOC. In a sense, carriers may cause the beginnings of a capacity crunch. If a sudden spike in shipping volume occurs, shippers see decreased capacity and go into panic mode, and in response, carriers attempt to make up the difference. Unfortunately, drivers may not be available.

Fewer Drivers Reduce Available Capacity

The U.S. driver shortage has been a major topic in supply chain circles for years, but it is always stayed in the background. Now, the American Transportation Research Institute (ATRI) notes the lack of qualified, experienced truckers is among the trucking industry’s top concern for the first time in more than a decade, reports Dustin Braden of JOC. The industry is short by approximately 50,000 drivers, and projections estimate that shortage to double, if not quintuple, over the next decade. While the shortage may fluctuate slightly, fewer truckers will always be among the top capacity crunch factors.

Increased Market Stamina Contributes to Capacity Crunch Factors

The stock market also plays a role in contributing to a capacity crunch. Sudden growth in the stock market means increases in manufacturing and commerce across the country, and as a result, shippers will have more product to move. Demand increases, and available capacity decreases. Since the 2016 election, the stock market has experienced continuous growth, and if history is an indicator of anything, the stock market is likely to continue growing under the current administration.

Regulations Reduce Available Trucks, Drivers and Driving Hours

The impact of the current administration and legislature may also contribute or alleviate a capacity crunch. Carriers and shippers have expressed concerns over the ELD mandate, asserts Iris Kuo of Trucks.com, and current leaders in Congress and the White House have expressed extreme discontent over increased regulations. However, few regulations have been pushed back or overturn since the inauguration, and the ELD compliance deadline is steady, says Jeff Berman of Supply Chain 24/7. This infers continued regulation of the trucking and shipping industry contribute to a capacity crunch, but shippers and carriers also tend to overcome these challenges. Ultimately, it is the combination of increased regulation and growth in the market that creates the problem.

Mother Nature Exacerbates Routine Capacity Crunch Factors Too

Politics aside, mother nature can throw a wrench into the transportation industry as well. When disaster strikes, more supplies, especially building materials and the necessities of civilization, are diverted to affected areas. This puts a strain on the existing transportation resources, and if mother nature wipes out the infrastructure in coastal areas, such as Houston, the Port of Miami or even shipments between Puerto Rico and the mainland, capacity tightens faster than anyone expects.

Amazon May Cause a Ripple-Effect in the Capacity Crunch Pond

A discussion on the capacity crunch factors is incomplete without thinking about the elephant in the room, Amazon. Amazon has been a key factor in contributing to capacity crunches around the globe with each release and launch of new services or products. Although Amazon owns its logistics network, Amazon sets the standards for other shippers.

Take the example of Amazon Prime and free delivery. Within months after the launch of free, two-day shipping through Amazon Prime, free shipping became the standard across the-commerce. As a result, shippers had to move product faster and without increasing costs, so capacity tightened again.

The Big Picture

A shipping capacity crunch is not a once-in-a-lifetime event. Even during periods of stable economic growth, a capacity crunch could be on the horizon. Shippers should take the time to learn about capacity crunch factors, which can be used to help predict forthcoming capacity crunches. In turn, shippers can implement better processes and best practices to help combat the effects of a shipping capacity crunch.

Adam Robinson
Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.
Adam Robinson
Adam Robinson
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