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Home » transportation woes to continue in '07
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transportation woes to continue in '07

December 1, 2006
DC Velocity Staff
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Time may heal all wounds, but so far, it's done little to ease shippers' woes. Shippers responding to a recent survey said they had yet to experience any relief from the ongoing trucking capacity crunch. Not only were things not getting better, they said, things were actually getting worse in at least two areas: carrier availability and service. A full 58 percent said they'd had trouble finding a truckload carrier this year (compared to 54 percent last year). As for service, two-thirds of the respondents reported that they had either seen no improvement in service or had actually seen service decline. That survey, an online poll conducted in July by DC VELOCITY and the Warehousing Education and Research Council (WERC), served as a follow-up to a study conducted in the spring of 2005.

Though the situation has improved marginally as oil prices have dropped, respondents weren't optimistic about the future. And with good reason, says Cliff Lynch, president of C.F. Lynch & Associates and author of the survey report. There's still plenty of cause for concern, he says. For one thing, it's unlikely that the truck capacity shortage will ease anytime soon. Demand for trucks continues to climb (the American Trucking Associations predicts that freight volumes will grow by 33 percent in the next decade). And truckers seeking to add capacity will continue to be hampered by a chronic—and worsening—shortage of drivers. Right now, the industry is short about 20,000 drivers, according to the ATA. Within seven years, that shortfall could reach 111,000 drivers.

In the meantime, the rails are dealing with a crunch of their own. "The railroads are moving more intermodal traffic than at any time in their history," says Lynch, who notes that intermodal loadings rose 6.4 percent over year-ago levels in 2005 and have continued their upward march in 2006. "As imports increase and more and more motor carriers divert traffic to intermodal service, there are valid questions about the railroads' ability to provide acceptable service."

If availability problems weren't enough, shippers say they're paying more for less service. A full 83 percent of shippers said they'd been hit with rate increases in 2005. And just under three-quarters (74 percent) reported that they'd experienced increases again in 2006. Although the average increase was running at about 5.9 percent at the time of the survey (July 2006), respondents said they expected rates to rise by 9.0 percent on average for the year as a whole.

"Carriers are pricing on supply and demand," says Lynch. "And as long as they can maintain a level of service that is less than the demand, shippers will be at a disadvantage unless they step out of their comfort zone and make adjustments to their own operations."

If the survey results are any indication, that's just what many did. A full 74 percent of shippers said they had responded to service issues by changing their operating procedures and processes. In most cases, those changes involved their carrier selection practices. Reversing a long-term trend toward consolidating business with a few carriers, shippers are now expanding their carrier rolls. Forty-three percent of the respondents to this year's survey said they had added carriers to their approved provider lists.

Others have responded by making modifications to their own operations in hopes of making them more carrierfriendly. For example, 25 percent have extended their operating hours to offer carriers more flexibility and to help shift some of the activity to nonpeak hours (a move that generally translates to increased productivity for both shipper and carrier). That follows the 39 percent who had already done so in 2004. Many have moved to seven-day, 24-hour operations.

In addition, 30 percent say they've begun engaging in collaborate techniques—both with other divisions within their own companies and with outside business partners, like carriers. Those who say they're collaborating more closely with carriers, for example, report that they're providing truckers with more timely notice of upcoming shipments, holding regular service meetings and improving communications.

And at least one respondent has come up with a truly distinctive approach to easing the capacity crunch. His company has started a truck driver training school. Enrollment is not restricted to drivers from the company's own fleet, he noted. The school has slots available for drivers from other carriers as well.

Transportation Trucking Rail Intermodal
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