Truck driver shortages, the electronic logging device (ELD) rule, upticks in e-commerce shipments, and capacity constraints are all taking a toll on transportation networks in 2018. Whether procurement agents are working with domestic or international sources of supply—or a bit of both—most are feeling at least some impact from these and other trends that are shaping the transportation environment this year.
Trucking is of particular concern for companies that have found themselves standing at the intersection of high demand (due to robust economic growth), lower capacity, a driver shortage, and regulations like ELD. Large and small truckload fleet capacity is down 3% so far in 2018 compared to 2017, according to American Trucking Associations, while the total number of loads being shipped has increased by 5.4% (compared to the same period last year).
“We’ve never seen numbers like this,” ATA’s Bob Costello said during a recent investor call. Contract and spot freight rates are climbing, with the contract rate average revenue-per-mile growing by 3.5% in 2017. Through the first two months of this year, the ATA reports, contract freight rates have increased by 15% per mile.
Here are four more trends to watch as the year progresses.
Growth in e-commerce is impacting air freight capacity. It’s not just trucking that’s feeling the impact of the high volume of e-commerce orders; air freight has also been affected. “As e-commerce consumers continue to demand shorter and less costly product availability, along with faster new product launches and design updates, importers are seeking to mitigate inventory carrying costs by any means necessary,” LEGACY Supply Chain Services’ Russ Romine told SupplyChain24/7. To offset this trend, Romine tells companies to “proactively protect space” with their carriers and freight forwarders, knowing that these providers can do a better job when they know in advance what your requirements, demand cycles, and long-term needs are.
The ELD mandate is hurting trucking capacity. Congressionally mandated as a part of MAP-21, the ELD was put in place to help create a safer work environment for drivers, as well as to make it easier and faster to accurately track, manage, and share records of duty status (RODS) data. An ELD synchronizes with a vehicle engine to automatically record driving time, for easier, more accurate hours of service (HOS) recording.
The rule applies to most motor carriers and drivers who are currently required to maintain records of duty status (RODS) per Part 395, 49 CFR 395.8(a). It impacts commercial buses as well as trucks, and to Canada- and Mexico-domiciled drivers. As trucking companies navigate the ELD mandate, experts predict a productivity drop of 4% to 6% following this rollout, exerting more pressure on capacity. “These capacity pressures are occurring amid a thriving economy with an overall strong GDP,” GlobalTranz’ Bob Farrell writes in Transport Topics, “which is increasing demand for trucks.”
Transportation providers are using more technology to help improve logistics. The news for 2018 isn’t all negative. Logistics providers, carriers, and freight forwarders are all integrating technology that helps them work better, smarter, and faster in the high-demand transportation world. Companies like Convoy, for example, partner with carriers and offer a mobile platform that shippers can use to match their own demand with available carrier space. Expect to see more artificial intelligence (AI)-, blockchain-, and Internet of Things (IoT)-based technology deployed by the transportation sector over the next 1-2 years, all with the goal of streamlining the process for both shippers and recipients.
Rail and intermodal traffic are buoyed by general economic trends and demand for transportation. If 2018 is the year that the trucking capacity crunch comes to a head, then it will also be the year that a growing number of companies turn to rail and intermodal to handle their freight. According to the Association of American Railroads (AAR), U.S. railroads originated 1.05 million carloads in March 2018 (up 3.6% over March 2017), and originated 1.08 million containers and trailers in March 2018 (a 6.5% increase over March 2017). Combined U.S. carload and intermodal originations in March 2018 were 2.10 million—up 5% (or 102,308 carloads and intermodal units) over the same period last year.
“Railroads are a derived-demand industry,” AAR’s John T. Gray pointed out in a recent report. “Their level of business depends to a large degree on what’s happening elsewhere in the economy. There’s always some economic uncertainty—today that involves, among other things, trade relations, commodity prices, and what the Fed will do about interest rates—but economic signals today are mostly positive.”