Combating Refrigerated Capacity Restraints: Relationships Can Help!

Posted - May 14, 2015

Combating Refrigerated Capacity Restraints: Relationships Can Help!

By Jay Moss, President, Capacity Services and Jim Matt, Director of Sales, Capacity Services

Jay Moss

Jay Moss
Jim Matt Jim Matt

Capacity is a word that is constantly on our minds. Is there enough capacity available to handle my freight? Will capacity continue to tighten? What strategies can my organization implement to prepare for and actively cope with a capacity shortage?

From 2004 to 2008, shippers experienced a significant capacity crunch, and in 2009 to 2012, the economic downturn drove many trucking companies out of business while a shortage of over-the-road (OTR) truck drivers remained. The market has since partially bounced back, and 2014 was a profitable year for trucking.  However, more recently, it was expected that overall trucking rates would go down as oil and fuel prices decreased – but that hasn’t been the case, particularly in the refrigerated trucking sector.

The current volatility in the trucking market has become a serious concern for many companies – there hasn’t been such volatility in quite some time. Right now, there is a significant lack of refrigerated truckload capacity, and all those in the market are actively competing for the limited refrigerated capacity that is available.

Regulatory Changes and Driver Shortages Continue

The current driver shortage is a major factor adding to the problem, and one that the trucking industry is going to continue to struggle with in the coming years. Additionally, regulatory changes continue to reduce productivity (3-5% by most industry estimates), and further take drivers off of the road. As capacity continues to be an issue for shippers, regulations will only further exacerbate the problem, while also driving up prices from the carriers, which will eventually be passed on to consumers.

The most recent driver shortage has been particularly difficult because the market is seeing a different generation of long-haul trucking – fewer drivers are willing to spend multiple weeks on the road, and most are pursuing more regional opportunities. And truck drivers for refrigerated units are a specialized position, and therefore even more scarce.

As a result of all of these problematic changes, retailers and CPG companies are experiencing some of the highest freight costs they’ve seen in recent history, and it’s become critical for shippers to strategically plan for these challenges to ensure access to truck capacity and avoid disruptions in the transportation of goods.

Relationships Matter More Than Ever

In a specialized market such as refrigerated trucking, relationships mean more now than ever before – a good relationship between a shipper and carrier can and will transcend any market volatility. Carriers, just like shippers, are always looking for ways to improve efficiency and streamline their operations, which includes being consistently mindful of the companies they work with and keeping detailed metrics for their shipper partners.

Recent history has shown that outcomes can sometime be disastrous when long-term relationships are sacrificed over price. And with all of the unpredictable factors that can impact transportation, capacity shortages in the refrigerated sector continue to be a matter of when, not if. It is imperative that shippers be proactive in implementing strategies that create an agile supply chain able to adapt to changes in the market and maintain efficient operations during capacity shortages.

What is your organization doing to combat capacity restraints? What relationships have been beneficial during the capacity shortage?