Overcoming capacity constraints in the shipping industry is a challenging task due to the ongoing and unpredictable shifts in the market. Freight shippers face various obstacles, including finding reliable capacity, ensuring freight security, managing pricing fluctuations, and dealing with unexpected surges in volume. Rising customer demands and expectations further add pressure to achieve on-time, in-full deliveries while maintaining profitability. Moreover, conditions have improved in recent years, it is important to recognize the volatility of the shipping industry and the potential for future market shifts.
There are no direct ways to curb these challenges, while choosing the right carrier must be an important deciding factor to minimize your cost and maximize capacity and efficiency. When deciding on shipping modes and carriers, you may have to choose between asset-based and non-asset-based carriers. While brokerage carriers give you the flexibility to choose from a wide variety of carriers and flexibility in so many aspects like location and variable pricing to keep your supply chain moving smoothly.
In this blog, we will explore the prevalent causes of capacity constraints in the shipping industry and provide effective solutions to overcome them. By leveraging asset-based capacity, technology advancements, and embracing flexible shipping modes, you can enhance the logistics of your business, ensuring increased capacity and improved efficiency. Let’s begin by understanding tight capacity, before delving into the challenges and strategies involved.
What Is Tight Capacity?
Tight capacity is a situation where the demand for shipping services exceeds the available supply of carrier capacity. This can be caused by a variety of factors, such as increased demand during peak seasons, reduced capacity due to unexpected events like weather-related disruptions, or constraints on capacity due to regulations or shortages of qualified drivers.
When capacity is tight, shippers may face challenges securing the transportation services they need, and carriers may have greater leverage to increase prices. As a result, shippers need to plan ahead and work closely with carriers to find ways to optimize capacity utilization and minimize disruptions.
What Are The Major Causes Of Capacity Constraints?
Capacity constraints may have several factors to be considered depending on the market shift. To effectively stay ahead of supply chain obstacles, shippers should keep an eye on these most common causes, such as:
1. Driver Shortage
One of the biggest reasons that freight capacity is so tight in the shipping industry right now is due to a driver shortage. Even though there was a driver shortage before the COVID-19 pandemic, the resulting growth in consumer demand made the existing issue even worse. There are not enough drivers to meet the need.
Working with the brokerage division of carriers like Packer Transportation and Logistics you can get the flexibility to access the verified carrier network professionals to meet on-demand capacity.
2. Economic Factors
Economic fluctuations can also impact capacity, changes in the national or regional economy affect the manufacturing and distribution process therefore affecting the demand for transportation. As businesses may have to adjust their shipping volumes and transportation needs in response to changes in the market.
To navigate economic fluctuations, you must work closely to build a trustworthy relationship with carriers and logistics partners to stay ahead in the market.
3. Regulatory Changes
Changes in hours of service regulations, the electronic logging device mandate, compliance and safety standards, environmental regulations, and licensing requirements can limit driver availability, increase costs, and impose additional burdens on carriers. This reduces the industry’s capacity to meet shipping demand efficiently, resulting in longer transit times and limited flexibility for shippers.
To ensure the effectiveness of your supply chain, it is crucial to maintain compliance by staying up to date with regulations. Additionally, you have the option to consider solutions such as a trailer pool, which not only allows for flexible loading and unloading of freight but also minimizes the financial impact of detention spending resulting from delays.
4. Seasonal Demands
Surges in consumer demand during peak seasons can overwhelm trucking companies and exceed available capacity. When the demand for trucking services exceeds the available capacity, prices tend to rise. Shippers may have to pay higher freight rates during peak seasons or face increased competition for securing transportation services.
To tackle this you should plan ahead for seasonal fluctuations in demand to mitigate the impact on transportation capacity. In addition, working with an asset-based capacity provider, you get access to a reliable pool of fleet and experienced drivers with a proven track record of consistently delivering goods safely and on time.
How Do Industry Regulations Impact Capacity Constraints?
1. Electronic Logging Device Mandate:
Looking ahead, Electronic Logging Devices (ELDs) and the valuable data they collect, along with stricter enforcement of hours of service, will greatly enhance productivity for truckers, efficiency for supply chains, and safety on our highways. However, in the shorter term, it’s important to note that the ELD mandate might temporarily impact truck capacity.
With less flexibility available to truckers, they occasionally find themselves compelled to halt at specific locations until they are legally permitted to get back on the road. Moreover, the duration required for loading and unloading, varying with the size of the freight, can potentially affect the delivery timeframe and lead to detention and backlogs.
2. Commercial Driver’s License Requirements:
Without professional truck drivers, your supply chain may come to a screeching halt. Their expertise and dedication ensure deliveries are completed safely and on time. Pairing with the mounting demand for trucks has resulted in a capacity shortage, that’s further exacerbated by the fewer qualified truck drivers in the market. Consequently, these demands impose tighter turnaround and response times, pushing carriers to their limits and triggering a snowball effect.
3. Environmental Regulations:
Not surprisingly, more than 72% of the nation’s freight is moved by truck which has a consequential impact on the environment. While environmental regulations are vital for promoting sustainability in the trucking industry, they can have a tangible impact on shippers’ capacity by reducing the number of available trucks and limiting route options. Additionally, implementing environmentally friendly technologies may increase operating expenses.
4. Safety Regulations:
While safety regulations are implemented to ensure the well-being of drivers behind the wheel and freight securement. They have significant impacts on shippers’ capacity, as it emphasizes vehicle maintenance, inspections, and load securement. However, complying with these regulations may require additional time and effort, potentially impacting the efficiency and capacity of carriers to handle shipments. Additionally, safety regulation compliance incurs extra costs, which may affect shippers’ capacity due to higher transportation rates.
Strategies for Shippers to Overcome Capacity Constraints
A. Load Planning:
Shippers can optimize capacity by planning their truck loads early. This involves analyzing shipping patterns and identifying opportunities to consolidate loads or adjust shipping schedules to maximize truck space utilization.
B. Network Optimization:
Shippers can optimize their shipping network by evaluating their transportation routes, considering multi-modal options, and choosing carriers with the most extensive coverage in the desired lanes.
C. Freight Consolidation:
Consolidating multiple shipments into a single load can help shippers save on transportation costs, increase efficiency, and reduce environmental impacts.
D. Intermodal Transportation:
Shippers can benefit from intermodal transportation by integrating diverse modes of transport like trucking, rail, and shipping. It gives flexibility and helps bypass congested highways, optimizes containerized shipping, reduces costs, and improves overall supply chain efficiency.
E. Collaboration with Carriers:
Shippers can work collaboratively with asset-based carriers to develop long-term relationships and gain better visibility into capacity availability, which can help them plan their shipping schedules more effectively.
F. Shipping Flexibility:
Shippers can improve their capacity by being flexible in their shipping schedules and having the ability to shift between different transportation modes and carriers to meet changing demands.
Technology Solutions to Address Capacity Constraints
In this volatile market, there’s no doubt about it, you need to find new efficiencies to do more with what you already have to stay on top of the supply chain. You need to keep a close eye on asset utilization and prioritize shipments to make the most out of the capacity that you have.
These are a few highly recommended technology solutions to maximize efficiency while minimizing capacity constraints:
A. Transportation Management Systems (TMS):
TMS helps shippers optimize their shipping operations by automating processes, such as load planning and carrier selection. This allows shippers to better manage their capacity and make more informed shipping decisions.
B. Load Optimization Software:
Load optimization software helps shippers maximize their truck space utilization by analyzing data and identifying opportunities for consolidation, thereby reducing the number of required shipments.
C. Real-Time Freight Tracking:
Real-time freight tracking provides shippers with real-time visibility into the location of their shipments, allowing them to proactively address issues and ensure timely delivery.
D. Electronic Data Interchange (EDI):
EDI streamlines the exchange of data between shippers and carriers, reducing manual tasks and improving efficiency. This helps shippers better manage their capacity by minimizing the time required to find available carriers.
E. Freight Marketplace Platforms:
Freight marketplace platforms help shippers identify and connect with carriers who have available capacity, making it easier for shippers to find the right carrier for their shipping needs.
F. Predictive Analytics:
Predictive analytics uses historical data to forecast capacity demand, allowing shippers to plan their shipping operations more effectively and proactively adjust capacity as needed.
Identifying technology that offers you more visibility and added capacity while adding valuable insights into the carbon footprints allows shippers and carriers to track their shipments and ensure timely delivery. Utilizing all assets for head-and-backhaul, creating more efficient roundtrips, and using technology advancements have helped shippers save costs and carriers earn more, resulting in a win-win situation for both.
Now you must have a better understanding of how to overcome capacity constraints in a tight market. The logistics industry faces several challenges that directly affect capacity, including driver shortages, economic fluctuations, and regulatory changes. However, by partnering with an asset-based capacity provider and utilizing technology, these challenges can be overcome, and efficiency can be increased. Additionally, opting for flexible shipping modes and establishing trustworthy relationships with carriers can minimize disruptions and maximize capacity utilization. Shippers should prioritize planning ahead, staying informed about industry regulations, and maintaining close collaboration with carriers to optimize their logistics operations. By adopting these strategies, shippers can meet the growing demands of customers, achieve on-time and in-full deliveries, and safeguard their bottom line in an ever-changing market.