Tackling the Capacity Crunch
Mark Kunar, EVP, Strategy, Transportation and Automotive, Engineering & Manufacturing, Chemical & Energy, DHL Supply Chain, North America, discusses the ongoing trucking capacity crunch and gives companies tips on how to effectively tackle it.
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As carriers, shippers, and the trucking industry itself rise up to meet the challenges of the persistent capacity crunch, all three are getting more creative in an environment where driver shortages, the retiring Baby Boomers, new regulations, and the uptick in e-commerce orders are all having an impact on trucking availability.
Prevalent since last year, the capacity crunch basically means that there are fewer trucks and less container space than there is freight to haul. For shippers operating in this unbalanced environment, finding full truckload (FTL) and less-than-truckload (LTL) capacity is not only difficult, but the services themselves are usually more expensive.
These environmental factors put unusual constraints on shippers whose customers have come to expect same- and next-day deliveries as the norm. In this Insider Q&A, Mark Kunar, EVP, Strategy, Transportation and Automotive, Engineering & Manufacturing, Chemical & Energy, DHL Supply Chain, North America, discusses the ongoing trucking capacity crunch and explains the value that a reliable, experienced logistics provider brings to the table in this challenging environment.
Mark Kunar — EVP, Strategy, Transportation and Automotive, Engineering & Manufacturing, Chemical & Energy, DHL Supply Chain, North America
Q: Why are we still feeling the impact of the 2018 transportation capacity crunch?
A: It was hard to escape the economic realities of the transportation capacity crunch in 2018. DAT Solutions, which tracks trucking industry data, reported a more than 30% increase in the national average spot rate for freight trucking from month to month last year (comparing 2018 to 2017).
Few shippers anticipated that sharp of an increase, which stretched budgets to the breaking point and negatively impacted 2018 financial results across a number of industries. Despite increased pricing stability this year, shippers continue to struggle with securing reliable capacity. Incremental process changes and renegotiations with carriers are simply insufficient to deal with the magnitude of the current situation.
Q: How can shippers best find capacity?
A: What works best is a fundamental change in how transportation is managed. That is best accomplished by partnering with a third-party logistics (3PL) provider that combines deep transportation expertise and a range of solutions to unlock hidden capacity.
Working with a 3PL, shippers also get advanced visibility into market changes and more competitive pricing. Companies also need to take a fresh look at network design (which can be used to examine capacity and develop a plan of action), work with good transportation partners, and utilize dedicated fleets.
Q: What are the benefits of network design?
A: If a company isn’t getting some level of network design services as part of its transportation solution, its ability to fully utilize available capacity is limited. Working with a 3PL in the role of lead logistics partner (LLP)—which includes network design and procurement—for example, enables the move from a transactional to a strategic approach to transportation.
This can have a significant impact on available capacity. At DHL Supply Chain, we have a team of design specialists focused exclusively on reducing overall capacity requirements by optimizing routes, reducing LTL shipments, and increasing opportunities for backhaul. This isn’t a one-time event; the network must be continually reevaluated and reengineered in order to most effectively offset the effects of the capacity crunch.
Technology tools play an important role in this process but are only as effective as the engineer using them. In-house engineers who engage with the technology infrequently will struggle to get the most out of these systems compared to engineers who work with it every day and fully understand their capabilities and limitations.
Q: How do 3PLs deliver value in procurement?
A: Working as a lead logistics partner (LLP), your transportation partner should be able to deliver procurement value based on good visibility into carrier and freight markets—insights that come when your 3PL engages with carriers across all modes on a daily basis.
To be most effective, this relationship must incorporate a 3PL that takes a vendor-neutral approach to carrier selection (rather than prioritizing its own assets). Having an LLP conduct a carrier bid with its own assets competing against other carriers can create a perception of bias, and thereby limit the serious participation of critical carriers in the bid event.
Q: Can a dedicated fleet help unlock capacity?
A: Dedicated fleet services can be valuable for servicing the most demanding customers and meeting capacity requirements—especially on consistent lanes (i.e., routes that a freight provider runs often). An added benefit of securing capacity through dedicated fleets is that shippers lock in cost over a period, thus eliminating the spikes of the open market.
Providing an effective dedicated fleet solution in today’s market requires a mature and competitive approach to driver recruitment and retention. Before you pick your provider, ask about the stability of the company’s workforce and the availability of drivers willing to perform special services such as unloading. Continual evaluation and reengineering are both essential to maximize fleet capacity. Strategies like daily dynamic routing, driver utilization during nonpeak periods, and route optimization all contribute to greater productivity of a dedicated fleet.
Q: What else should shippers know about the capacity crunch and how to navigate it?
A: Cost-effectively securing capacity in today’s tight market requires a holistic approach that enables continual reengineering and optimization while delivering visibility into the market and freight spend in North America and globally.
When LLP and control tower services are augmented in tandem with freight brokerage and dedicated fleet solutions, shippers can more consistently meet their capacity requirements while minimizing the impact of rising rates.
Q: What should shippers look for in a 3PL?
A: Working with a 3PL as your transportation partner can provide advance visibility into market changes while enhancing your ability to evaluate and source alternatives. Your goal should be to work with a partner that has:
- Deep knowledge of the carrier market
- Freight brokerage services (where appropriate)
- Dedicated fleet solutions
- The ability to fully leverage digital freight brokerage platforms
- Capabilities that match your requirements
It’s important to note that not all 3PLs possess the expertise, relationships, and processes to efficiently handle international shipments. By contrast, DHL Supply Chain manages both domestic and international shipments through global control towers that use consistent processes and technology to maximize capacity and manage spend.
DHL SUPPLY CHAIN
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