Buckle Up for Worsening Conditions
The United States has been facing a severe trucking shortage since the electronic logging device (ELD) implementation in late 2017 exacerbated capacity issues. More than four months in and the crunch does not only seem far from easing but appears likely to worsen.
Trucking spot rates are 28 percent higher through March 23, 2018 than what they were in 2017, according to Bloomberg. The more stable contract rates haven’t been immune from the fallout either and are expected to rise 12 percent in 2018.
The “soft” implementation of the ELD has since ended; we can now expect to see more stringent control and enforcement of the regulation. Trucking companies who fail to comply will risk facing full punishment, including but not restricted to being placed out of service and/or monetary fines.
The situation is likely to deteriorate. In terms of rates and shortage, I expect both to worsen even as business continues to pick up as it traditionally does.
Rates will continue to increase—for two reasons. The first is a result of the economy’s natural rebalancing due to the lack of supply in face of the high demand. And the second is to concurrently lure more drivers to join the sector. On that note, truckers could end up changing their terms to counter costs. Measures include reducing free time from two hours to one, which could be one way to increase drivers’ revenues.
It’s unlikely we’ll see an ebb in this crunch at least until the summer, which is when recent truck orders will be fulfilled. If the new arrival of truck orders is as significant as reported in some circles, it will help to alleviate the problem. But at the end of the day, these trucks still require drivers to man them and that takes us back to square one.
Many trucking companies are already active in terms of trying to match up loads so that the driver can have an import load to deliver and then go somewhere to have the container loaded for an export move. This is to take full advantage of the mileage so that the truck continues to generate revenue in both directions.
Technology could play a hand here in helping truckers. By sharing data, they can cooperate and share loads and work together to increase revenue. This system is similar to the Chinese co-loaders who trade cargo to fill each other’s needs. Trucking companies could try to find a common ground for doing that here. There are platforms and various tools that offer something along those lines. Given the situation we are facing right now, technology could be a game-changer and help take it to the next level.
It's going to be a rough summer for everyone—especially those who are involved with container drayage. Some people may opt to move their cargo to warehouses by the ports by partnering with them to be able to load. This may seem costly with all that extra handling, but it could be better than the alternative of missing sailings and deadlines or accruing overnight charges with drayage truckers. This may be a worthwhile option for some shippers to consider given the current crisis. The more seasoned and larger importers may be able to negotiate additional free time, which would allow them more freedom and flexibility in delivering or picking up their loads.
Until the current crisis finds a way to correct itself, shippers need to be patient. The best advice for importers and exporters now is to try to build in some flexibility in their supply chain to allow for shipment delays. Schedule your shipment in advance—a lot more than you usually do—and have things planned out so you can secure your driver well in advance.