Current events are reshaping global supply chains with speed and force. Changes to ground transportation, likewise, are whipsawing shippers and carriers.
Supply and demand have seesawed triggering instability in ground transportation operations. Cargo capacity, driver shortages, and technology are in flux. That makes for continued uncertainty and volatility in the future.
The post will reveal the trends reshaping the industry. We’ll look at how current trends can impact your business. Moreover, we’ll provide insights into these trends to gain competitive advantage.
Cargo Capacity is Available but Declining
As the economy picks up, capacity will continue to shrink. Shrinking truck capacity will result in a tight market. Spot truckload capacity has already declined. It dropped 17.5% in May of this year. Dry-van, refrigerated, and flatbed rates, meanwhile, increased 1.2% (Truckstop.com).
At year’s end, we should see a scarcity of truck capacity as freight demand exceeds capacity. According to FTR Transportation Intelligence, a truck shortage due to depressed truck orders
will further impact capacity.
As a result of the uncertainty surrounding cargo availability, shipper-carrier collaboration has increased. That’s due in large part to the pandemic’s jolting of supply chains. Operations and costs fluctuated erratically, complicating business decisions.
For the time being capacity is in good supply. But that will change by the end of 2020. Truck capacity will continue to decline at a gradual pace. Then as the economy rebounds, spot rates will increase. In general, spot rates will increase but not at the levels seen in 2014 or 2018.
Unpredictability and instability will challenge shippers and carriers alike. Operating in a tighter market and lacking expertise, shippers will partner with 3PLs. Shippers are already reaching out to 3PLs. That will continue as shippers struggle to cope with increasing complexity.
Truck Driver Shortage Declining but Still Persistent
As of May, the Bureau of Labor Statistics (BLS) reported 88,000 truckers had lost their jobs. Rehiring of truckers depends on how fast consumer demand snaps back. The experts are divided on whether there will be a V-shaped recovery or not. Regardless, it’s clear, the recovery will be uneven.
Consumer staples, pharmaceuticals, and eCommerce have been strong during the pandemic. Other sectors, meanwhile, remain weak. But employment is coming back. May’s unemployment rate declined to 13.3% from April’s rate of 14.4%
A slow, but gradual recovery will likely continue until a vaccine is in hand. Then in late 2021 or early 2020, the economy should surge past its pre-coronavirus levels.
Moving cargo will be spotty with urgent products and commodities getting priority. On the upside, we have the emergence of driverless vehicles (DVs) and electric vehicles (EVs). Companies developing trucking solutions include Amazon, Waymo, Daimler, GM, and startups like Nikola.
These developments will help relieve the costs of moving goods by truck. DVs will ease the driver shortage, and EVs will cut operating costs.
Expect driver shortages to decline over the short-term, as artificial layoffs end. But that doesn’t address the longer-term issue of an industry-wide driver shortage. In the long-term, driverless and electric trucks will help address this issue.
In the short-term, the driver shortage will persist as the economy rebounds. In the long-term, as the shift to DVs and EVs gains ground, the driver shortage will see relief.
Dwell Times Improving but Remain a Long-term Issue
Dwell times have been an enduring issue facing shippers and carriers. And as you already know, current events compounded that issue.
Loading and unloading times reached 24 hours when we saw panic-buying. Now, with the reopening of the economy, dwell times are improving. With more predictable demand, the driver check-in process has improved reducing dwell times.
As shipping increased nationwide, FourKites reports dwell times declined up to 20 percent. But some states are still struggling. The mixed results are due to the spotty nature of the recovery. Idaho‘s dwell times have increased 8%, and Minnesota’s has increased almost 16 percent.
Putting aside temporary improvements, detention rates will continue to hamper operations long-term. Detention rates have worsened since 2018, indicating a rising trend. This is an issue still looking for a solution.
The adverse effects on operations and costs has stakeholders seeking an automated solution. One solution in beta testing by True Load a software company.
It consists of an “aggregated and anonymized” database of more than 5,000 facilities and docks. Today, most facilities and docks focus on Southeastern states. But the database is expanding to include national coverage.
This solution captures arrival and departure times from shipping and receiving sites. Users, shippers, and carriers can mine the database to create reliable route plans. This solution promises to end planning by assumptions and guesswork.
If successful, this database can help streamline operations and reduce costs. All in all, dwell times and associated penalty fees will decrease. On the whole, operations will be better, faster, and cheaper.
Ground transportation is in flux. The trade war with China, Covid-19, and technology have only exacerbated matters. Uncertainty and volatility will continue to batter the economy and supply chains.
The impacts to ground transportation show signs of improvement in the short-term. The long-term, however, presents challenges shippers will have to tackle.
Cargo capacity, truck driver shortages, and dwell times will continue to confront shippers. Confronting these challenges alone is a formidable task at best. A more effective way is to partner with a 3PL who knows ground transportation.
Contact American Global Logistics to leverage the trends shaping ground transportation. Our Ground Transportation team can put you on the right side of these trends.