Where in the World is Capacity? Maximizing Utilization and Blurring Modes
There has been a lot of discussion over the past few years on the lack of trucking capacity, particularly in full-truckload (FTL) carriers. LTX has even covered this topic in previous blog posts. The rising level of demand for trucking capacity, fueled by economic and e-commerce growth is only highlighting the pains of capacity crunches. However, the problem of the capacity crunch is perhaps not a result of a lack of availability, but a lack of efficient utilization. Many industry experts are offering a blurring of modes in both FTL and LTL as a solution to this capacity problem. This article will briefly recap the background and causes of the capacity crunch as well as cross-modal solutions and the benefits of partnering with a 3PL on these alternate strategies.
The Capacity Crunch
We have spent some time analyzing the capacity crunch, in fact, it was one of the driving forces of our 2017 year in review. Let’s take some time to do a brief recap of some of the important factors.
By December 18, 2017, the regulation regarding the use of electronic logging devices or ELDs for truckers will be fully implemented. In addition to the hours-of-service (HOS) adjustment, it’s going to place a burden on the capacity as drivers won’t be able to put in extra hours on the road. FTL is much more vulnerable to the capacity crunch as opposed to the LTL, which can fall under the exemptions if the logistics provider meets the criteria.
Another topic that has been extensively discussed is the driver shortage. The continued shrinking of the driver pool is making it difficult for carriers to properly accommodate orders and increasing demand. Almost 80% of freight operators expect their volumes to increase into 2018. With most of their capacities stretched thin, this could result in increased rates and prices for consumers.
All these factors contribute to the worrying trend of unsustainable freight volume growth. According to the American Trucking Associations (ATA), freight volume will grow an average of 3.4 percent annually through 2023. In contrast, the trucks freight volume would fall to 67.1% by 2028 from the current 70.7%. This is incredibly concerning, especially if industry players do not work to expand capacity. However, there is perhaps an alternative or complementary strategy that can address the capacity crunch by more efficiently utilizing capacity that is already available.
Collaboration and Mode Blending
The typical response to a capacity crunch is to simply add more capacity, more drivers, more trucks, more linehauls more everything. However, there is another option. An overlooked aspect is wasted space and inefficient capacity utilization. There is capacity available in many LTL and FTL shipments, bits of space that are not being utilized to their fullest extent. Increasing levels of demand are resulting in more partial truckloads and wasted capacity. Customers don’t want to wait for a truck to fill up, they want their products moved immediately. The number of partial loads are drastically increasing for many industry leaders, resulting in inefficiencies and wasted space.
This unused space is a very present reality, but the trick is identifying the areas where this capacity exists as well as the best way to consolidate shipments to maximize utilization. This can be very expensive if not infeasible when done by individual industry players. However, increasing collaboration between companies can provide better means of identifying areas of potential additional capacity. Collaboration can allow separate companies to take advantage of each other’s capacities. This can result in what is known as mode blurring or blending.
This “blurring’ is becoming gradually more prevalent in LTL and FTL carriers. This collaboration between the two modes is creating a “middle lane” where both of their capacities can be shared and maximized. LTL trucking companies say they are picking up more and heavier “spillover” freight from FTL carriers as accessible capacity shrinks, on the other hand, FTL operators are taking more partial shipments and consolidating LTL freight. This blending of operations between the two modes creates a more fluid and efficient freight transportation experience.
Now that we have discussed the capacity crunch and how mode blurring can help address the problems, let’s discuss how you can take advantage of it. The best way to maximize your freight operations is to partner with a reputable 3PL such as LTX. 3PLs can offer partial truckload and volume LTL brokerage options for their customers. This type of service level will only increase as e-commerce companies such as Amazon drive the demand for more and faster shipping and fulfillment times. Now is the time to begin revamping your operations to respond to these trends and better capture this demand.
If you have any other questions or would like to take the next step and revolutionize your supply chain, then please contact us below today!