Capacity Crunch to Continue But Not Cripple

When the discussion turns to available shipping capacity, especially during the peak season from July through December, the issue may be more emotional than cerebral. Based on anecdotal evidence so far this year, the search for air, sea, truck and rail space to move freight is not as daunting as in years past. That is the short-term perspective. Expect congestion and capacity problems to grow in the not too distant future.

The port congestion that plagued importers a few years ago, particularly at the Port of Los Angeles/Long Beach, served as a clarion call to global supplychain managers, leading many to lengthen the shipping season and to seek alternatives to the crowded West Coast ports. This year ports on both coasts are already into peak shipping levels, according to Paul Bingham, an economist with Global Insight (Waltham, Mass., www.globalinsight.com), an analysis, forecasting and research firm that produces the Port Tracker report for the National Retail Federation ( Washington, D.C., www.nrf.com).

"We're going to see record numbers continue into fall," he says. "The increase in volume is going to challenge everyone's ability to perform, but the ports themselves and the truck and rail systems are all operating okay so far. We expect shippers will make it through peak season without significant congestion."

While such observations offer momentary comfort to shippers, other observers predict that unless dramatic measures are taken to improve the nation's infrastructure the situation will be much worse in years to come. In testimony before a U.S. House of Representatives committee on transportation and infrastructure, Patrick Sherry—co-director of the National Center for Intermodal Transportation (www.ise.mssstate.edu/ncit) and a professor at the Intermodal Transportation Institute at the University of Denver—cited congestion, conservation, capacity, competition and connectivity as the major challenges facing the U.S. transportation infrastructure.

Carriers are beset by a number of serious issues that have a direct bearing on their ability to provide capacity when demand ratchets up again. The list includes fuel costs, the need to purchase new equipment (with engines that meet new emission requirements), hours of service rules, and higher-than-ever insurance premiums. Another serious problem that will only grow in the future is the shortage of drivers. A carrier can purchase trailers and tractors, but if there is no one to sit behind the wheel the equipment and its capacity will sit idly at terminals.

A study conducted last year by Global Insight for the American Trucking Associations (Alexandria, Va., www.truckline.com), The U.S. Truck Driver Shortage: Analysis and Forecasts, observed that in the absence of substantial market adjustments, the driver shortfall that already exists will rise to 111,000 job openings by 2014. To find drivers carriers will have to attract people away from other jobs they may have entered during their 20s. Construction and manufacturing jobs offer the most labor competition for trucking.

"From an analytical standpoint, it is interesting in looking at the demographics to see how everyone is worried about recruiting truck drivers as they enter the work force in their early 20's," says Jim Gillula, managing director with the consulting division of Global Insights and the principal author of the study. "But the truth of it is many companies aren't even looking at people until they are 25."

Speaking as an economist, Gillula sees higher driver wages as providing some degree of resolution to the issue.

"Looking at the thing as the Bureau of Labor Statistics measures it, with their weekly earnings series for long-distance truck drivers, the wage gain has actually slowed a bit," he notes. "Given continuing strength in construction markets right through 2005, the trucking industry hasn't made much of a gain."

Wages aren't the only factor playing a part in recruiting new drivers. One inducement is getting drivers home more frequently. Having a regular route can help capture and hold drivers. For shippers entering dedicated freight agreements with their carriers, there is greater assurance of having necessary capacity.

One industry observer, Richard Metzler, chief commercial officer of Greatwide Logistics Services (Irving, Texas, www.greatwide.com), says such lifestyle issues are more important than pay. "Dedicated is the top-of-thefoodchain driving job because they're generally home every night or every other night. It's predictable work and predictable income. It's usually no-touch freight. It's a pretty attractive job and a pretty attractive lifestyle," he says.

Carriers are working to give drivers the newest equipment possible; installing hi-tech communications equipment in cabs that offer entertainment and keep drivers in touch with home. They're also restructuring routes so that moves are shorter, and handoffs from one driver to the next are more frequent, which gets drivers home more often.

In his personal blog (BlogOnLog), Michael Stolarczyk, senior director of business development for Exel (www.exel.com), summarizes the steps that shippers and carriers can take to maintain levels of service, find capacity and grow business:

  • Improve pay and overall compensation for truck drivers, and work to meet their lifestyle needs.
  • Use capacity as a factor when creating import strategies, determining ports and locating distribution centers.
  • Consider including transportation brokerage firms as core carriers. Core carrier programs offer access to the capacity necessary to remain viable in the market.
  • Define and reduce vendors and outsource to gain buying power.
  • Segment the country, instead of delivering to all regions every day. This strategy has helped many companies level out daily shipping requirements
  • Lobby government officials to build awareness of the capacity crisis and ensure new rules, regulations and spending don't exacerbate the problem.

For Stolarczyk, working together is absolutely essential to success. "You have to share and put faith in organizations and you have to collaborate in an open environment," he says.

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