August 6, 2015 5 Ways to Fight the Looming Capacity Crunch 8/6/2015 On July 27, 2015 The American Trucking Association (ATA) and IHS Global Insight released their US Freight Transportation Forecast through 2026. ATA chief economist Bob Costello states, “The outlook for all modes of freight transportation remains bright,” he adds, “Continued population growth, expansion of the energy sector and foreign trade will boost trucking, intermodal rail and pipeline shipments in particular.” According to the report, US freight volume will increase 29% in the next 11 years: Trucking will remain the main mode of freight transportation but its share of all freight will slightly decrease from 68.8% in 2014 to 64.6% in 2026. Pipeline volumes will increase from 10.8% in 2015 to 18.1% by 2026. Railroads’ share of freight tonnage will drift down from 14.2% in 2015 to 12.3% in 2026 However intermodal freight is projected to be the second fastest growing mode at 4.5% annually through 2021 and increase 5.3% from 2022-2026. This projected increase in volume combined with capacity issues, such as the driver shortage and federal regulations which may reduce the number or the productivity of compliant drivers, leaves many shippers looking for direction on what to do and how to handle this looming capacity crunch. A recent report from Stifel warned, “those that wait for the capacity shortage to become obvious will pay extraordinarily high rates in the spot market to obtain sufficient capacity.” 5 Ways to Fight the Capacity Crunch 1. Plan in advance. With tight capacity, lead times for loads can be long. Forecast and book anticipated shipping needs to ensure capacity. 2. Find partners. A 3PL may have relationships and access to a broader network of carriers than the shipper, increasing the likelihood of finding additional capacity. 3. Utilize Technology. Explore logistics technology platforms that provide a one-stop-shop to find additional capacity when existing carriers can’t accommodate needs. An expensive full blown Transportation management system (TMS) may be out of the budget but no-fee platforms such as WIN (Web Integrated Network) enable visibility, control of freight management and significant freight savings, all at no cost to the customer. 4. Explore new modes. Some over-the-road loads may be good candidates for intermodal alternatives. 5. Become a shipper of choice. Reduce unproductive time for the carrier: Be ready for the carrier when he or she shows up – carriers are on the clock even while waiting to be loaded. Consider flexible pick up times. Discourage the standard Monday 8:00 am delivery times requested by many customers. If weight tickets are required, look into the cost feasibility of installing a truck scale within your plant. Reward carrier loyalty by offering loads to current carriers first. Pay freight bills on time and accurately. Provide driver-friendly facilities. Although no one can predict the exact magnitude of the looming capacity crunch, planning ahead, establishing relationships and adopting appropriate technologies will help shippers get themselves in the best position to manage through it.