Tighter Trucking Capacity Likely Ahead for Shippers
"Prudent shippers are currently lining up multiple sources of capacity," said Andy Moses, senior vice president of sales and solutions for Penske Logistics. "Those that don't plan will have their freight hit the spot market, and the spot market will likely rapidly increase from a rate perspective."
Challenges in the Market
Tim Denoyer, vice president and senior analyst of ACT Research, said the nearly two-year freight recession is finally ending, but the pace of capacity re-engagement is excruciatingly slow for shippers. "Truckload capacity has been tight for a few months, and intermodal capacity tightness added fuel to the fire in August with West Coast imports surging. Next comes spillover into LTL," Denoyer said, adding that with freight demand improving and drivers uniquely short, higher freight rates are a one-way bet at this point, and higher driver pay isn't far off.
LeAnne Coulter, vice president of freight management for Penske Logistics, said she is seeing continued tightness, which the industry had been experiencing just before the Fourth of July holiday weekend. "While there might be some reliefin certain areas, it is an incredibly tight market right now," said Coulter.
Additionally, forest fires on the West Coast, the threat of hurricanes in the South, lingering uncertainties from the pandemic and changes in consumer buying habits add to the market's volatility. Plus, several industries—including grocery and retail—will hit an expected fourth-quarter surge.
Tom Scollard, vice president of dedicated contract carriage for Penske Logistics, said driver workforce issues present an added challenge this year. "It is no easy task getting drivers today," he said, adding that drivers may become scarcer as large package delivery companies ramp up for the holiday season.
Solutions for Shippers
Penske Logistics can support shippers through its brokerage capabilities, dedicated contract carriage and backhaul opportunities. Penske Truck Leasing can provide equipment for those wanting to ramp up capacity.
Third-Party Carriers: Coulter said shippers can identify those carriers with which they'd like to do business and have a transparent conversation about volumes, lanes and flows. "That provides carriers the opportunity to plan in an environment that is rather chaotic and messy," she said, adding that shippers can talk to carriers about their capacity availability and ways to support the carrier to bring added capacity to the shipper's business.
When capacity is tight, shippers must focus on being the shipper of choice. Coulter said shippers should be mindful of how they're treating drivers, which can include giving drivers access to clean water and restrooms while also ensuring everyone's safety, especially during the pandemic. "That is becoming incredibly important for companies in securing capacity going forward," she said.
Dedicated Service: Penske's Dedicated Contract Carriage service can provide shippers with guaranteed capacity and a high level of service without requiring the investments associated with the operation of an in-house private fleet. There is no time like the present to implement DCC in time for the fourth quarter; there may be opportunities throughout the country. "Providers are willing to work with shippers to create a solution during times like this. It all comes down to communication," Scollard said.
Backhaul Opportunities: Penske has several backhaul opportunities within its dedicated fleet. "We'll be aggressively looking to maximize utilization of our equipment and our people," Scollard said. "Now is the time for shippers to start planning and sharing a forecast with a dedicated carrier. That will allow them to formulate as many options as possible to help with the capacity needs they're going to have."
Moses added that regardless of where you operate, Penske may be able to craft a solution. "We're a good, reliable source of capacity. Because we run dedicated, many of our lanes are repeatable, and we can be a good outlet for certain shippers in certain lanes in our fleet," he said.
Scollard advised shippers to get their contracts lined up now ahead of the fourth quarter. "There is no silver bullet, but as long as the economy keeps jumping ahead, it will put more pressure on the shipper if they aren't proactive and working the various options we have available," he said.