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Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All

From SCDigest's On-Target E-Magazine

- Feb. 10, 2014 -


Logistics News: US Shippers Likely to Face Truck Capacity Issues in 2014

Rising Volumes and Flat Capacity Could Spell Trouble, Expert Says, and Truck Companies Selling Out in Favorable Environment Adds to Pressure

SCDigest Editorial Staff


As part of our supply chain predictions for 2014 series, we solicited the perspectives on the year from a number of supply chain gurus, who prognosticated in specific areas of supply chain and logistics.

SCDigest Says:

As the freight environment continues to improve, and carriers stay consistently profitable, the owners of many trucking company may decide it is time to "head for the exits."
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That included Mike Regan of TranzAct Technologies, who was back again in 2014 with some specific predictions for the US transportation sector - and as usual, they are work paying attention to.


Regan, fo example, believes that US shippers are likely to see tough capacity conditions for much of 2014.


"Capacity will be a big story because in 2014, as shippers will experience firsthand the correlation between economic and freight activity," Regan says.


He notes that many experts have predicted that if and when the US achieves sustained growth in the GDP of 2.5% or higher, shippers would have a hard time finding trucks to move their freight.


US GDP growth was 4.1% on an annual basis in Q3, and 3.2% in Q4 - so it looks like we are already there.


And indeed, the ATA Freight Tonnage Index reached a record level of 131.7 in December (versus a baseline year of 2000). That increase pushed the index 6.2% higher for the full year, making it the index's best year since 1998 in terms of percentage growth.


Yet, in general carriers have maintained significant asset disipline, as virtually all of the major truckload carriers are barely if at all adding to their fleets - yet quick to chop capacity in slow freight periods.


"Expect to see higher rate increases in 2014 if you want to secure capacity from your carriers," Regan says.


ATA Freight Index Surged in 2013 to Record Levels



Understanding the capacity issue is pretty simple, Regan adds.

"First, carriers have not been adding capacity in their fleets, as the anemic economy of recent years has lessened the demand for trucks. With supply and demand factors in balance, carriers have not been able to get the type of rate increases they need to earn the financial returns they need to justify expanding their fleet."

Regan also says that what he calls "the War on Trucking" is real, and it is negatively impacting productivity in the trucking industry, which in the end serves to reduce effective capacity.

(Transportation Management Article Continued Below)


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That war includes the FMCSA's new Hours of Service rules, which became effective in July, 2013, but more is coming, Regan says.

For example, this year the FMCSA will be issuing their proposed rule for Electronic On Board Recorders, (EOBR's), and will also be looking at how trucking companies should address driver health issues such as Sleep Apnea. While EOBRs might be a very good thing, and are already used by some of the industry's largest carriers, they frankly may serve to reduce capacity be eliminating the ability of some carriers/drivers to skirt HOS regulations.


The ATA has also been highlighting such issues as growing increases in tolls, the push in some quarters to classify independent contractors as employees,the impact of the CSA 2010 program, and more.


"Together, these factors mean it will be more costly to operate a truck, as tighter capacity enables carriers to be more aggressive in passing increases through to shippers," Regan says.


Carrier Consolidation is Also a Factor

Regan says capacity will be affected by continued carrier consolidation.

As the freight environment continues to improve, and carriers stay consistently profitable, the owners of many trucking company may decide it is time to "head for the exits" - selling their companies and putting some real money in their pockets.


"We will see an increasing number of acquisitions in the trucking industry," Regan says.


Then as acquiring carriers "rationalize" the procured networks, they will often reduce the number of the new combined assets - and shippers will have fewer options.

On the LTL front, shippers recently dodged a bullet of sorts when the Teamsters working for struggling YRC Worldwide agreed to extend a series of contract concessions the company said it had to have, as it faced a mountain of debt and short term payments it would have been unable to make.

After the union vote, YRC was able to immediately restructure some of that debt and give itself a little financial breathing room.


A YRC failure would obviously have been disruptive for many shippers and taken a lot of capacity out of the LTL market.

Do you expect to see trucking capacity issues in 2014? Why or why not? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.



Recent Feedback

We have 5 trucks parked that are in good shape and drivers for those trucks. At this time we are keeping drivers busy doing other work. In Canada, to pay and keep good drivers we have to pay $21.00 per hour including dock time. My bank says until the rates go up another 10% they will not finance new trucks and trailers. The large customers are still getting locked rates in Ontario, Canada below the cost of operating trucks here. Many truck drivers left trucking in 2009 and got other jobs paying $18-$25 per hour.

stephen webster
virtual finity
Feb, 27 2014