The need for available drivers and equipment is commonplace in a consistently evolving economy. This "truckload capacity" issue is a problem that plagues the domestic trucking industry. The article discusses capacity and solutions regarding this emerging issue.
Truckload capacity dictates what transportation options are available to domestic shippers across the country. Determinations in available equipment, drivers, and supply chain output play a critical role in capacity. Shippers commonly seek out a DTC or DCC model to avoid capacity issues and maintain their shipping lanes.
Truckload capacity is a severe issue in the world of domestic freight transportation. Learn more about the concerns revolving around capacity below.
Truckload capacity is a term in domestic freight logistics that refers to the volume of freight that’s able to be shipped by a truckload carrier. The trucking market is constantly in flux regarding pricing, availability, equipment, and truck drivers, all of which are factors that impact truckload capacity.
The United States has an incredible amount of domestic freight that is transported via motor carriers annually. However, due to the incredible powerhouse nature of the U.S. economy, supply and demand are always high.
The American Trucking Association has forecasted continuous growth over the next 10 years. What does this mean for the capacity of truckload carriers and the long-term future of the industry? It means that capacity itself will need to grow to meet demand.
|2017||2.8% growth in tons of freight moved|
|2023||5.1% growth in tons of freight moved|
|2028||36.6% growth in tons of freight moved|
As you can see in the illustrated forecasted market, the example clearly shows signs of massive growth. Unfortunately, there is a flip side to all of this. With the rapid growth of an industry, comes the need for infrastructure to combat the onset of inflation to truckload rates.
The only way to meet the demands of the U.S. economy and curb any supply chain disruption is to increase the volume of drivers and equipment. Currently, there is a hiring boom occurring in order to get drivers to meet capacity.
At its core, truckload is a term that defines a mode of transportation for freight shipping. However, trucks cannot move short or long-haul freight across the country alone. These trucks require the use of trailers that are towed behind them carrying freight.
Several forms of trailers are used to move freight from the point of origin to the point of destination. Some examples of various truckload trailers come in the form of the following:
Truckload serves as the most commonly used form of shipping in logistics. It is what keeps supply chains and distribution centers flowing. Failure to meet current truckload needs-based requirements means disruption.
This disruption to the supply chain is of utmost importance to anyone in logistics. Most often, it is not necessarily a lack of equipment that prevents capacity from being met, it is the lack of truckload drivers.
The term “logistics” refers to resource management. It is essential to understand precisely what logistics is before you can begin to understand what capacity means in logistics. At the forefront, logistics deals with the packaging, handling, storage, and transportation of goods.
When you factor in capacity into the world of logistics, a lot more factors come into focus:
In logistics, capacity is directly related to availability. In other words, the availability of drivers, trucks, and shipping space to move goods from origin to destination. In the transload world, this availability extends to rail, barge, and air freight, for example.
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In the truckload industry, rates differ depending on varying factors. Trucking companies or carriers will offer these different rates for the shipper, giving them flexibility in their shipping choices.
The two shipping markets are the carrier’s market and the shipper’s market. The shipper’s market is generally more favorable for spot rates. Whereas, on the other hand, the carrier market is more favorable to contract rates.
Spot Rates: These short-term rates are contractual because they are based on the current outlook of the truckload shipping market.
Contact Rates: These annual long-term rates are based on forecasts and trends, which help predict the market, offering a better outlook in terms of capacity.
Honestly, it just depends on what the shipper's needs look like. For some, the right option is contract rate if you have a static business that does a lot of shipping over multiple lanes. Contract rate protects both the long-term pricing and capacity of the needs of your shipments.
For others, periodic shipping over multiple lanes might be keen to use spot pricing due to the shifting dynamic of the spot market in terms of both pricing and capacity. Either way, these two options are great for facilitating shipments while considering capacity.
There is a season for everything. This includes truckload shipping. Two things you might consider to keep your supply chains strong are produce shipping season and peak shipping season. You might find reduced capacity for your shipment during these two busy times. Produce shipping season is generally in the spring and summer; peak shipping season is in the late summer to fall.
You might find that produce shipping season, especially on the East Coast, lasts from April to July. This is when produce is harvested and moved from the farmer’s field to processing centers to warehouses to supermarkets.
Peak shipping season is when retailers are getting ready for the back-to-school and holiday rush. It typically lasts from August to October, just after produce shipping season. The volumes of shipments typically spike this time of year and full truckload spot rates might spike.
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It is precisely the state of availability between both trucking equipment and drivers that make up the total capacity within the truckload market. It is up to logistics managers, distribution centers, and trucking companies to weigh these factors to be effective in the freight market.
Changes in truckload indexes are used to help forecast capacity in domestic truckload shipping. Shifting changes in market conditions also influence the capacity within truckload shipping. Here are some takeaways of influencing factors within capacity:
Here are some examples of individual areas of note that can guide a shipper in choosing whether to use a spot rate or contract rate in terms of affected truckload capacity.
These reasons influence domestic capacity throughout the year. From a shipper's point of view, there is a litany of determining factors that can lend themselves to aid in determining whether or not a shipper chooses a spot rate vs a contract rate in shipping.
When factoring in truckload capacity, a shipper must also consider how they wish to ship truckload goods. Options like less than truckload (LTL) and full truckload (FTL) shipping, depending on the number of goods being shipped, are options that favor one or the other.
With LTL shipping, goods are loaded onto a truck without one shipment maximizing load capacity. Essentially only filling a portion of the truckload. This means that capacity volume determines how many shipments are loaded within a single truckload.
Whereas in FTL, the entire load is from a single shipper. Factors like destination and desired shipping time frame can all determine the capacity of an FTL shipment. As you can see, truckload capacity is affected by individual factors and truckload shipment type.
With that said, one of the most common options for shippers is an LTL shipment at a spot rate in a pinch. However, for shippers who do a lot of regional shipping, it is done as an FTL truckload at a contract rate. Both situations factor in truckload capacity and how to leverage capacity in their methods.
In the modern era, technology helps supply chains stay updated with the latest innovations to help keep the supply chain flowing at peak proficiency. Supply chain technology can affect capacity in a positive way by keeping shipping at a consistent pace.
How exactly is this accomplished? Well, with the institution of automation and warehouse management software (WMS). Goods are sorted, stored, and routed to truckloads in a fashion that best meets capacity in all cases and destinations.
Why is this important, you might ask? From a shipper's perspective, keeping their goods flowing without risking bottlenecks in capacity is mission-critical for any business. Using the latest tech in the supply chain gives you, the shipper, an edge over the competition and keeps your goods flowing.
It is always best to seek out the assistance of a truckload specialist when trying to keep your supply chain moving. Our team is happy and eager to help you avoid any unnecessary bottlenecks while keeping truckload capacity in mind.
Over the past few years, there has been a surge in dedicated truckload capacity (DTC). DTC has emerged as one of the most surefire ways to avoid capacity constraints for shippers who deal with truckload companies or carriers.
There is also another option known as dedicated contract carriage (DCC). Shippers may find better value when considering DCC. It just depends ultimately on what the shipper is looking for in their region.
Here are the differences between DTC and DCC:
DTC has shown tremendous growth over the years because more consistent capacity is available. Offering the consistent support of equipment and drivers along a route that is shared with other shippers has great value in avoiding overstretching capacity.
DCC has become increasingly popular among shippers who do a lot of business regularly because their capacity is not shared with anyone. The drivers and equipment are exclusively reserved for the individual shipper alone in specific shipping lanes.
Understanding truckload capacity can help you move freight with cost efficiency in mind. Nevertheless, truckload capacity isn’t alone when considering the rate of truckload freight.
Here are some key examples of things to factor in when considering freight rate:
Ultimately, the freight rate itself does not affect truckload capacity. However, it is the individual instances of requirements that do place potential conditional change on capacity. For instance, a particular time frame request can dictate the available capacity of equipment or drivers.
While other options, such as freight insurance, have no bearing on a freight shipment's truckload capacity. In most cases, any change to the shipping lane, time frame, etc, will almost always incur problematic situations in capacity.
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