June Capacity and its Effect on Carrier Performance

This past June, truckload capacity measured a three year high in the available loads to available trucks ratio (a key indicator of how tight the current market is). Certain areas of the country are impacted far more than others – the south in general has been very tight. The tools we use have the ability to narrow in on market segments to help us understand the dynamics and challenges of certain regions, and we often try to pass this information along to help educate our clients with regards to what we’re seeing. Moving past the end of the second quarter and past the 4th of July always loosens capacity up a bit, but we do not expect this to last very long.

Truckload capacity issues are always a key predictor for service interruptions and rate increases within the LTL market. While there are many reasons LTL rates are rising, in an article written by Greg West with C. H. Robinson, he identifies five:

  1. "There's more ecommerce, and it's changing the game. With the advent of 'free shipping,' consumers no longer hold their online order until they can justify the shipping costs. Since products sold online ship directly to consumers' homes rather than to brick and mortar stores, there's more emphasis on the final mile than ever. And all of these small shipments are adding demand in the LTL space and potentially lessening the demand for full truckloads.
  2. Manufacturing is growing, too. According to the ISM index, the manufacturing sector shows nine consecutive months of expansion. That means more transportation, for both the raw materials used in the manufacturing process as well as for the finished product that's being moved to distribution centers (DCs) and customers.
  3. Carriers are using technology to price better. Just as shippers use historical shipping data to improve their supply chains, LTL carriers are adopting technology that helps them be more efficient and better understand what freight is profitable and what freight isn't. Dimensionalizers are just one example of the latest technology that carriers are using. Dimensioning machines can accurately calculate the amount of space a shipment needs within a trailer rather than rely on the national motor freight classifications (NMFC). These tools lead carriers to be more accurate in allocating cube and weight, which can affect shared capacity pricing.
  4. Driver shortage. It's summer time. The season when everyone wants to be outside - including drivers. People like taking their vacations during nice weather, and enough drivers taking summer vacations can throw off a carrier's coverage. Even more pressing is the number of drivers that leave their driving jobs for construction jobs every summer. Combined, these situations are adding a great deal of pressure to the availability of drivers.
  5. Operations changes. While new LTL carriers rarely come on the scene, we do see acquisitions and consolidations among exisiting LTL carriers. This can cause capacity that was once readily available to leave the market entirely. In addition, several regional LTL carriers are adjusting their service areas, adding stress in the areas most affected by changing service boundaries."