The US economy has made great strides under the current administration, and the tax cuts and jobs act represents a major accomplishment and hope for the future of the transportation industry. As full truckload moves forward, the nation’s infrastructure will be put to the challenge, and available capital can be reinvested to expand the countries carriers and improve wages reports Jennifer McKevitt of Supply Chain Dive. FedEx is planning to invest more than $200 million in compensation increases for hourly staff, and performance-based incentives will further strengthen the company’s standing in the market. On the heels of the tax cuts and jobs act passage, shippers may be hopeful or apprehensive about how new legislation will affect full truckload shipping, and they may have reason to be.
The Issue: Few Legislative Accomplishments Leave Uncertainty as Full Truckload Moves Forward
Defining the successes and troubles of the current administration is a conversation fraught with anger and discord. While the administration has made great promises for the future with a $1 trillion spending bill, asserts Freight Waves, congressional actions have not produced results.
The proposed spending bill would allocate $200 billion in federal spending over 10 years. The $200 billion versus $1 trillion appropriation contributes to the confusion. The federal government would make appropriations of $200 billion over the next 10 years. The remainder would be gathered from appropriations from the state, local and private funding sources. In other words, the proposed spending bill instills a 20 percent maximum on projects occurring within the 10-year timeline. Compared to past spending bills, that is a 30-percent decrease from the current federal funding.
Such a bill is likely to gain congressional approval from both parties, but to date, the Tax Cuts and Jobs Act remains the only major accomplishment that has impacted the transportation industry. Meanwhile, manufacturing stands uncertain following the Administration’s announcement to enact new steel and aluminum tariffs, explains Shefali Kapadia of Supply Chain Dive. Only time will tell how such actions will impact American consumers.
The Solution: Infrastructure Bills and Pressure on Manufacturers Will Catalyze the Trucking Industry
The solution to this conundrum rests on the backs of all legislators, as well as an understanding of how shippers can reduce driver-and carrier-associated risk. There are two possible outcomes to these legislative plans, which are as follows:
- The infrastructure spending bill passes, enticing carriers and drivers to ramp up activity and new construction, if not renovation. Therefore, capacity may decrease even further into a full-blown crunch.
- If the infrastructure spending bill stalls, shippers will face the continued pressure and scrutiny of carriers and drivers. No shipper will be safe from feeling the impact of increasing freight rates in response to higher trucking costs deriving from deteriorating infrastructure and higher risk of an incident while in transit.
This means shippers must start interacting more with carriers to secure capacity, as explained by Chris Brady.
The Reward: More Production and Available Capacity Will Translate Into Economic Growth and Business Longevity
The implications of the Tax Cuts and Jobs Act reflect carriers and drivers still reeling from rebound. Following a continuous period of increased regulations under the previous administration, carriers have an opportunity for record-breaking growth, and shippers can take advantage of the prosperity.
Over the coming year, shippers may see more scalability as carriers push for more funding and incentives to increase capacity. However, the current state of the capacity crunch alludes to more struggle than benefit, at least until a spending bill and additional, new legislation pass in Congress. As a result, shippers should start considering a partnership with companies capable of securing capacity; shippers should consider outsourcing freight management to third-party logistics providers (3PLs).
3PLs stand to benefit from changes in legislation too, but their nature creates an advantage in an era of uncertain legislation. 3PLs have the experience in locating available capacity, negotiating rates with carriers, and securing the right mode, not just the only available mode.
Keeping negotiations in mind, shippers should also consider how negotiated rates can effectively lock in carriers for pricing, provided shippers are able to consolidate freight to create full truckload shipments. If not, the bargaining power of a 3PL may be enough to secure lower rates, which reduces risk while awaiting new legislation.
Putting it All Together…Future Legislation Will Push the Transportation Industry Forward
Future legislation could range from additional tax cuts, depending on how the Tax Cuts and Jobs Act bears out in the coming months. If the major carriers adhere to their promises, a second set of cuts and stimuli could be on the horizon. However, 2018 is the mid-terms, and history teaches that mid-terms often act as a check on power for the party in control of the White House. Therefore, shippers must not delay; they should begin the process of leveraging all resources, including outsourcing freight management to a 3PL, in case such events come to fruition. Remember the pendulum of full truckload moves in both directions.