Frozen out: Shippers of temp-controlled goods cite capacity as top concern

Shippers of temperature-controlled products are most worried about finding available truckload capacity and about wide temperature variances during shipping and handling that lead to product spoilage and disposal prior to sale, according to a shipper survey conducted by trucker RWI Transportation LLC.

According to the survey, which was conducted late last year among shippers of 18 temperature-controlled products, 42 percent of respondents cited finding capacity as their biggest challenge. About 20 percent said the ability to maintain proper temperatures during shipping was their biggest concern. In all, 108 shippers participated in the survey. Of those respondents, 20 percent came from the frozen food business and 30 percent had an annual transportation spend of over $25 million.

About 92 percent of respondents said they were impacted in some way by capacity shortages. Of those, 37 percent said the impact was "significant to extreme." About three-quarters of all respondents said they had trouble finding available capacity during peak seasonal periods when their products are most heavily in demand.

During certain periods in some parts of the country, "it is almost impossible to find trucks," said Richard Bauer, executive vice president and general manager of RWI, based in Highland Heights, Ky. Bauer cited as examples the produce-picking season in California and holidays such as Mother's Day and Valentines Day, when shipments of cut flowers from Latin America flood into South Florida for delivery to points north and west.

Not surprisingly, as capacity goes, so go freight rates. Bauer said rates in the past three years on produce shipments off the West Coast are "higher than I've ever seen." Bauer, who has been in the business since 1988, said strong U.S. demand for Asian import traffic has given carriers significant pricing power.

Conversely, rates on trucks moving westbound from interior points are at 20-year lows as carriers reposition their equipment along West Coast ports to capture eastbound traffic, Bauer said. Carriers are focused on just getting their assets to the West Coast and are willing to price near the bottom just to have some freight along to justify the haul, he said.

CAPACITY WOES

Truckload capacity overall has tightened considerably since the freight recession began in 2006 followed by the broader economic recession of 2008-09. It is estimated that about 15 to 20 percent of truckload capacity has exited the market in the past five to six years. During that time, truckers have replaced older cabs and trailers with newer equipment, notably to comply with tougher federal government diesel emission standards. But there have been virtually no new net additions to the nation's heavy-duty fleets in the post-recession era.

Refrigerated equipment capacity has been a mixed bag. On one hand, shippers find "reefer" capacity harder to obtain because there are relatively few carriers willing to work in such a specialized field where late or missed deliveries can result in product destruction and high claims payments. On the other, these carriers are more likely than dry van operators to add capacity because the margins on reefer shipments are higher and because there have been few shipping alternatives to truck.

Given its unique characteristics, a reefer unit can typically run as high as $65,000, well above the cost of the standard dry van unit.

The survey's respondents said the most common approach to combating the capacity shortage is to seek out new carriers. Other potential remedies include better planning and scheduling driven by timely data, the reliance on long-term contractual commitments to lock in capacity in return for consistent loads, and using more specialists such as third-party logistics service providers.

RUNNING HOT AND COLD

Once capacity is procured, however, shippers say they face the dilemma of shipping temperatures that are either too hot or too cold to sustain the products during deliveries. About 42 percent of all respondents said a too-warm temperature variance was the main reason that receivers reject shipments. About 23 percent cited colder-than-normal temperature variances as the main reason for shipment rejection. About 36 percent cited "damaged cases" as the primary factor behind shipment rejection.

About 46 percent cited the use of electronic temperature monitors as the most common way to try to mitigate the problem. Today, high-tech temperature monitors allow the climate inside a trailer to be monitored from a remote location rather than a driver stopping the cab periodically to check on the condition of the contents. Advances in the area of IT-driven temperature monitoring are expected to be a key factor in minimizing the problem, according to the shipper respondents.

Bauer said the onus of maintaining proper temperature controls falls with the carriers. Shippers can help, he said, by "pre-cooling" trailers that are drop-shipped at their facilities for loading. However, once the trailer is tendered and the paperwork signed, "it is our responsibility" to ensure product integrity, he said.