Update On Trucking Capacity
Trucking capacity is doing two things right now that every shipper should be aware of and planning for during the balance of 2020.
First, capacity is rapidly shrinking. As more and more consumers are homebound and businesses are either shuttering or operating with remote workforces, the need—and opportunity—for single truckloads moving from business to business has been replaced by smaller quantities delivering to more locations. Because of this, many traditional lanes of truckloads of single-shipper cargo are taken out of inventory and are replaced by truckloads of small packages being injected into local post offices and integrator facilities.
This decline in capacity means an increasing demand for a scarce number of trucks. This brings us to the second thing: getting loads covered and moved is increasing in price.
A just-published story in FreightWaves tells the tale succinctly and brings the facts and figures to back up what we’re seeing in the market.
With trucking prices at a 19-month high and capacity at a 22-month low, domestic trucking appears to be roaring back from the pandemic slump. Now the third such signal in a long line of industry markers that show recovery has begun. Intermodal rates and congestion, ocean equipment and box rates, and now trucking capacity and prices are all experiencing the low-supply/high-price swing as more people turn to e-commerce than ever before. Even warehousing space is quickly evaporating as brick and mortar stores see a pivot to online buying with homebound consumers and workers.
Confirming this is a report in the JOC (paywall, subscription required) identifying retailers working feverishly to rectify the stock-outs they experienced in the second quarter. To quote the article, “A number of retailers reported lower inventory levels during their latest quarterly earnings. Best Buy, Dick’s Sporting Goods, and Nordstrom, for example, noted inventory balances were 21 percent, 12 percent and 25 percent lower, respectively, than the year-ago period.”
The increase in imports through the Southern California gateway jumped 33.8% in July from the prior month whereas the total increase of US imports was only 0.9% month-on-month. This says that importers are looking at the fastest way to replenish, and via Southern California is quicker than all-water to the East Coast.
Initial pandemic forecasts warned us that transportation would drop and require capacity reductions, but this never came to fruition. Instead, without entertainment, travel, and social gatherings, people spent time shopping online and ordering direct from stores, requiring final-mile services that were at a premium due to PPE shipments taking precedence.
We’re thrilled to see signs of economic recovery despite the pricing pinch we feel. This traffic jam of cargo is far from self-regulating in the near term. Accurate planning, flexible and efficient routings, and clearly communicated changes and updates will be vital to managing the cost increases and finding space in choked lanes. TOC Logistics is standing by with options and ideas to work out alternative plans and patters to mitigate the expense and delays that come with such a tight market.
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