Trends in Transportation
While no two years are exactly alike, freight transportation in 2015 has been dramatically different than 2014. We aren’t seeing capacity shortages on a broad basis this year like we did in 2014, and while we expect capacity to modestly tighten once peak shipping season kicks in, we do not expect any significant capacity shortages this fall. Last year’s first quarter saw extreme weather issues, and though this year weather conditions weren’t quite as severe, we had to deal with the West Coast port challenges that also impacted domestic transportation. Overall, we had a much better start to 2015 due to more reasonable capacity demand balance.
If you think about it, today’s readily available capacity is not that much different than what was experienced during the recession of 2009. What should we draw upon from the recession that can be applied to today’s environment? One lesson is realizing the recession would be temporary and a time of transition. The economy would eventually cycle back up (and it did although at a very slow pace) so it’s very important to not make drastic changes to your supply chain and supply chain network. It’s a time for fine-tuning vs. throwing strategies out the window.
This same approach can be applied to today’s transportation operations. Just because truck capacity is available today does not mean you should shift intermodal freight back to the highways or slow down the conversion of highway freight to intermodal. It also does not mean you should throw out the Q1 bid results and go back to carriers for rate concessions on contract prices. We should live up to our agreements, recognizing that is the only way we can expect carriers to live up to their agreements when capacity is tighter.
Current State of CSA Regulation & Hours of Service
We have the FMCSA on the run in a good way. We, as a company, have been an outspoken critic of the CSA program. We know the CSA BASICS and regulations don’t measure safety accurately and aren’t reliable indicators of an individual carrier’s accident frequency. Fortunately, bigger entities such as the American Trucking Association (ATA) have taken the same position we have and spent time on Capitol Hill working hard to educate decision-makers on what needs to change. Right now, there is strong criticism of the CSA program in the House and Senate. In particular, many in Congress recognize the negative impact the CSA is having on small business trucking companies that simply can’t afford to lose customers and have trucks sit idle or run empty.
We’ve seen too many instances where shippers have wrongly started adopting CSA scores as a carrier credentialing tool, which is costing small businesses freight. Numerous studies have proven how fundamentally flawed the CSA system is. There is insufficient data to measure the vast majority of carriers operating on our highways and even for the largest carriers, where data is sufficient for statistical validity, the scores are not a valid predictor of individual carrier accident frequency. We will continue watching this and advocating for the FMCSA to determine which carriers are fit to operate on the highways and to shut down the carriers that are not fit to operate. There are a number of bills floating around in Congress, but it is too early to say whether an eventual bill will clear up the ambiguity around liability for carrier selection when things go wrong in freight transportation.
When it comes to Hours of Service (HOS), we think the logistics community is going to win on this front. While the restrictive restart provisions of HOS took 3-5% of capacity off the highway (and contributed to the capacity shortages we saw at the end of 2014), the good news is the restart provisions have been temporarily reset to what they were formerly and in part because of that, we’re seeing better capacity balance this year vs. 2014.
A recent study revealed that forcing drivers to drive during peak daytime hours due to the HOS restart provisions contributed to more daytime traffic congestion. It also revealed accident frequency per miles driven was higher during the day than during the night. We think there’s enough momentum in the Senate and House to either secure another temporary extension or, hopefully, a more permanent provision to keep the restart provisions at previous levels.
Best Practices for Dealing with Capacity/Demand Balance, CSA, and HOS
First, don’t fall into a false sense of security that capacity is widely available. While we don’t expect capacity to tighten this fall, it is only a matter of time until the over-the-road truckload driver shortage causes severe capacity constraints. Second, there is no silver bullet, but there are quite a number of actions shippers can take to become a “shipper of choice.” When capacity gets tight, you better be able to run faster than the other guy or the bear will catch you. You can learn about other key best practices by viewing the video below featuring Transplace CEO, Tom Sanderson, who speaks about transportation trends and issues.
What transportation trends are on your radar the second half of this year?