The squeeze is on. Higher fuel prices, a driver shortage, a major wave of government regulations and an improving economy are all playing their part in creating a problematic logistical environment – a nationwide truck capacity crunch and rapidly rising costs. We have been here before. Analysts hyped the trucking capacity crunch of 2004 as the “perfect storm” – when an improving economy and new Hours of Service (HOS) regulations caused
a record shortage of drivers.
In the last recovery, the capacity crunch crisis lasted about one year. This time we could get a full three years of tight supply (capacity). Up to 10% of freight will not move on its intended schedule. This is a condition that causes supply chain failures, with very large cost penalties. Under these conditions, the 30% price increases currently forecast over the next three years would get much higher on the most affected lanes.
Fast forward to 2013, and here we are again, new hours of service, higher fuel prices, same song, and same dance. While managing supply chain variables has become trickier, it’s not mission impossible. Proactively managing through this issue in the short term will set shippers up for success in the long term. As we talked about yesterday in our trucking capacity crunch series, co-loading and continuous move routing through collaboration by multi-freight shippers and carriers are two great strategies to undertake when you are looking to squeeze the most costs savings even in this capacity crunch we are seeing currently. Today we will talk about ten tactics you can employ today to combat the rearing ugly head we call the capacity crunch.’
Making Freight More Attractive and Ease Your Capacity Crunch Woes
There are different approaches shippers or logistics providers can make with their freight to make it more attractive. Some tactics are simple, some are more complex. Slight changes in each can make a difference in how carriers, providers and drivers view and eventually price your freight.
- Flexible pick up times: When shippers are flexible with pick-up times, if possible, it provides a greater pool of availability for drivers, resulting in an earlier dispatch for the driver and an earlier delivery for the shipper.
- Weekend pick-up and delivery: If pick-up and delivery times are available daily (including weekends) shippers and logistics providers will be far more likely to have their load moved more efficiently. Although some drivers are available on weekends, shippers may consider this dead time. Shifting operations to allow for weekend service may prove beneficial.
- Eliminate time-wasters: New hours of service rules make drivers’ time a perishable commodity. Make sure your operations are efficient and require the minimum amount of time from the driver. Capacity is created by moving more driver hours to the driving line, which means no dock, paperwork or inspection delays, and efficient appointments.
- Fast communication of volumes: Shippers and logistics providers on behalf of shippers who communicate earlier secure freight faster. With 24 hours or more advance notice of a pick-up time, most carriers will be 75% more likely to move a shipper’s freight. Add to that, shippers or providers who work to understand and communicate anticipated surges and spikes of freight may receive priority in capacity allocation.
- Drop and hook freight: Drop and hook freight is viewed by many drivers and carriers as driver-friendly freight., Converting to drop and hook freight, if a shipper has the volume and facilities to support trailer pools, may result in more efficient pick-up and drop-off scenarios.
- Relax operating rules and parameters: Business as usual may not work in peak, crunch periods. Be creative and flexible. Many rules can be bent. Allow existing carriers to utilize other carriers in their stead, for example, and perhaps extend operating hours.
- Examine other transport modes. See if other modes can supplement your needs during peak or constrained periods, such as Less-Than-Truckload (LTL) or pool distribution. Perhaps you don’t normally prefer intermodal, but checking out other modes can really help mitigate capacity issues.
- Be real, and be fair: Shippers need to frame capacity discussions in terms of what works well for both parties, as opposed to engaging in a zero-sum game where one benefits at the expense of the other. Seek alignment between business goals and outcomes of both shippers and carriers and this can result in better rates and exceptional service over time.
- Be consistent: Shippers should try to spread their loads over an entire month, rather than compress them into a one-week period at the end of the month. This rewards a shipper’s core carriers (the ones offering the best price-service matrix) by allowing them to better plan their schedules and thus carry more loads. Carriers favor consistency in their customers when capacity is tight and carriers will take care of the ‘steady’ load customers before the erratic load orders. Shipper consistency can result in better rates because carriers prefer a steady revenue flow to higher-priced but less-predictable freight.
- Finally, Employ Automation: It may sound like an obvious statement given the demonstrated benefits of a TMS, but there is no substitute for transportation management systems (TMS) when it comes to monitoring a transportation and logistics operation. From carrier performance data to order-level reporting to savings analyses, these systems provide unbiased information on virtually everything a shipper needs to know. A TMS allows shippers to benchmark real costs with historical and planned costs. Without this insight, it wouldn’t be clear why a plan succeeded or failed to meet the budget at the end of the year. Additionally, a TMS gives service providers the insight they need to perform at higher levels, the study said.
Don’t let the capacity crunch get you down. We’ve been here before, and we’ve weathered the storm. If you are finding you are having continual issues fighting the capacity crunch as a shipper, and are currently doing your transportation management in house, a great way to combat this is to look at hiring a expert logistics provider who can provide both custom solutions and great technology to combat rising transportation costs due to the capacity crunch.