So, what exactly is the capacity crisis?
A capacity crisis is when the industry has an abundance of loads, but there isn’t extra capacity (or trucks) available to ship the loads. For example, in 2003, the ratio was seven trucks to every one load. Today, it’s seven loads to every one truck. Essentially, there are too many loads with not enough trucks available to transport them.
This is considered a “crisis” because with no extra capacity available, prices will be extremely competitive — and logistics providers are under intense scrutiny to manage it all.
What’s causing this crisis?
The high demand for trucks is not the only reason we’re facing a capacity crisis. In our opinion, there are four leading causes: fleet deterioration, loss of truckers with commercial drivers licenses (CDLs), poor economic conditions, and an increase of government regulations. Let’s break these points down further.
As the economy fluctuates, not all fleets come through unscathed. Many businesses cut costs by scaling down their equipment. Some trucks and trailers are repurposed, but many remain neglected. According to Inbound Logistics, there are 190,000 U.S. trucking companies with less than twenty trucks. That, on top of the loss of drivers, may lead to an increase in rates for 2018.
Over the last few years, the driver shortage has steadily worsened, and 2018 won’t be any different unless some changes are made. Drivers with CDLs are either retiring or non-existent. The median age of a driver is 55, and continues to climb. Michelle Rafter wrote in an article for trucks.com that “the lack of higher pay…is leading drivers to quit, particularly long-haul drivers…[and] age restrictions are prompting millennials to bypass the industry in favor of jobs that are better paid and not as heavily regulated…” This combination of aging drivers and lack of interested millennials to take their place is fueling the driver shortage.
We also have to take into consideration the unpredictable setback that the 2017 hurricanes and fires caused the market. Any way you look at it, the economic conditions aren’t faring well for 2017 and the upcoming year. Jeff Tucker, CEO of Tucker Company Worldwide, said “today’s massive hurricanes in the Caribbean, in Texas and Florida have had a more adverse effect on the market than the Bush 2003 tax credit…and to make matters worse — the ELD mandate is upon us.”
With increased regulations like the ELD (Electronic Logging Device) mandate, many trucking companies can’t meet the requirements in order to stay in business. Currently there are about twenty laws impacting transport costs, and the ELD mandate going into effect this December is only adding to the crisis. Inbound Logistics reported that those who have adopted ELDs have had a 10% reduction in logged miles.
How can you prepare your business?
In past years, we’ve seen truck shortages after Hurricane Katrina in 2005 clear up within months, but have also encountered capacity problems in the winter that take until the summer to right themselves. This year, we not only have endured Hurricane Harvey, but Irma and forest fires throughout the U.S. as well. It’s nearly impossible to predict the exact outcome these natural disasters — along with the increased government regulations and driver shortages — will have on the industry.
The best anyone can do is prepare as much in advance for the capacity crunch as possible. If you can remain as flexible as possible in the coming year, and build (and maintain) a strong network of committed carriers, you should be able to handle whatever this capacity crisis throws at you.
To help, we’ve collected facts and statistics about the capacity crisis that you’ll want to keep top of mind as we end 2017. If there’s any other crucial facts or information we’ve left out, please let us know in the comments!