Carriers have been warning for the past two years that the trucking industry is facing a serious capacity shortage, and that it was only a matter of time before that shortage would start to affect operations. Well, that time may be here, with industry analysts and executives stating that capacity has become so tight, that the slightest uptick in the economy could have severe repercussions.
How bad is it? “Sometime in 2012 there is a reasonable probability of sporadic supply chain failures based on capacity,” freight industry economist Noel Perry recently told an audience at the Council of Supply Chain Management Professionals (CSCMP) annual conference.
The capacity crunch is attributable to two main factors:
- Continued Recessionary Fallout: The trucking industry underwent a major retraction during 2007-09, with as many as 3,000 carriers closing up shop in North America alone. Carriers eliminated underused routes and consolidated wherever possible. The American Trucking Association reported that demand for service fell by 24 percent, and that the average carrier cut its fleet by 14 percent.
- Driver Shortage: Fewer trucks on the road meant fewer drivers, about 150,000 of them. And now that carriers are in a position to replenish their ranks, they are finding a small pool of willing applicants. For one thing, life on the road is a demanding gig. Long stretches away from home and increasing federal scrutiny have chased away many potential applicants. But, as the industry has responded with higher pay and better benefits, the shortage is expected to gradually ease.
Most shippers did not feel the impact of reduced capacity right away, since volume was down 30 percent at the peak of the recession. But now that tonnage has rebounded, shippers are increasingly feeling the squeeze.
The capacity crisis “is staring us right in the face,” Mark Whittaker, vice president of transportation for PepsiCo told the CSCMP audience. “We probably haven’t ever been through what we will be going through in the next four years.”
So how can a shipper protect itself and ensure continuity of service? American Shipper offers three suggestions:
- Consider moving product to a non-peak shipping season;
- Be carrier friendly. Make your business as accessible and efficient as possible by paying bills on time, making sure trucks have immediate loading dock access and by not making drivers handle freight; and
- Try to be consistent with your shipping patterns and keep you carrier in the loop with regard to your shipping needs.
Those who are still not convinced that the threat is real should take notice: Perry warned the CSCMP audience that “It is probable that capacity shortages will last for several years, not just one…. We could easily see sporadic supply chain failures based on capacity shortages. That’s something we are not used to.”