Capacity Crunch? Not yet.
Posted on Apr 24, 2008 - 6:56pm by Wayne Weisser in Trucking
One of the many trucking blogs I read is Dan Goodwill’s. Dan is a transportation consultant and has high level experience in trucking and many insights into Canadian and American trucking markets. His latest post Wal-Mart and Target Stores Prepare for Capacity Crunch explains shippers need to pay attention to what Wal-Mart and Target are doing now, to prevent transportation problems later.
The overall capacity in the market is experiencing a decrease as some companies suffering through the freight recession close their doors. In fact, he indicated that trucking company bankruptcies are up significantly from previous years.
Currently this is not a problem for shippers as a host of economic issues have had a negative impact on demand. The lower supply of trucking capacity is in line with the drop in demand.
So, things should be picking up. If the freight demand is starting to match the truck supply, maybe rates will start being reasonable enough for the rest of us to survive.
However, Steve noted that some major shippers are taking steps to protect their companies’ operations as the economy begins to turn and as truck capacity shrinks. Wal-Mart has signed a two year commitment with the carriers that participated in their freight bid; Target Stores has locked in their capacity for three years.
Someone may need to explain this to me. How can you lock in capacity? I’m sure the rates are going to have flexible surcharges and if the rates and the frequency of the freight is enough to keep carriers afloat, why or how can they lock in capacity? Isn’t that part of the bid process? A carrier is going to say, “I’ll carry this much freight at this price”, isn’t that saying you’re going to have the capacity to carry the freight you bid on?
But if Wal-Mart and Target are concerned about it, I’m sure there’s a reason.
The last paragraph -
There is definitely going to be a period of upheaval as the dust settles on the current freight recession and demand for truck capacity exceeds supply. The supply will go to those shippers that are paying compensatory rates, have treated their carriers with integrity and respect and have contractual commitments in place. Relying exclusively on the spot market for capacity may result in significant rate shocks over the coming years.
That’s what I’m counting on. Raking some of these shippers over the coals to make up and pay for my past suffering and payback for taking clear advantage of truckers. I know a lot of loads I get that are re-scheduled or canceled are because they’ve found someone cheaper. Which is how the game works. Sometimes you win a little, sometimes you win big, sometimes you don’t. I’m pretty sure there’s a special level of hell for brokers that have the nerve to offer $.85 or a dollar a mile freight.
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Interesting stuff. My thought has always been that the big companies will keep trying to take a bigger bite as the smaller carriers go under. If those guys choose to get out of trucking instead of driving company trucks there is going to be big problems for shippers.
The best or our youth are still in Iraq, there are not enough recent veterans to fill truck seats, and there are many non-veterans that are way to soft to be out here. Don’t get me wrong, there are many good young folks, but I don’t suspect there are enough to fill all of the void.
I am guessing the numbers of small companies and owner operators going under will be larger than ever before. I talked to a reasonable older owner-operator today and he told me he was late on his 1st payment ever in his 40 years of trucking. He was 61. I’m sure age is a factor and he can’t run like he used to, but he should have the experience to make it if things were possible at all.
You are very correct to look at what the big players are doing, at least for general freight. I would not want to be the guy figuring out what the capacity is going to be! I’d love to see how one goes about that and where they pull the data from.
Wayne said:
“I’m pretty sure there’s a special level of hell for brokers that have the nerve to offer $.85 or a dollar a mile freight.”
God I hope so. If there’s not we need to make one.
It’s costing ME just about a dollar a mile to run. That’s just fuel. Add monthly maintainence (oil change and minor fixit) and it’s over a dollar. Add things like tires (It cost me $5,000 to put new tires on my truck last time….probably more now), annual overheads, annual this and that…and it’s pushing $1.50 a mile to run. Not counting any major repairs.
So why would I want to even consider $.85 a mile freight? The only way I can run for $.85 a mile is to run empty and slow. I would be subsidizing the shipper to do that.
Oh…everyone needs to call their congress critters:
Last night U.S. Senators Olympia Snowe (R-Maine) and Sherrod Brown (D-Ohio) introduced legislation which will require that 100 percent of fuel surcharges paid by shippers be passed through to whoever actually pays for the fuel to haul the shipper’s goods, obviously in most cases that’s truckers.
S. 2910, the “Trust in Reliable Understanding of Consumer Costs Act” or “TRUCC Act” will ensure that middlemen will no longer be able to skim or pocket fuel surcharges that should be going to truckers. Senators Snowe and Brown worked closely with OOIDA on this legislation.
Please call the offices of your 2 Senators to ask them to support S.2910. Ask your Senators to commit their support for S. 2910 by signing on as cosponsors of the bill.
Obviously we should support this. This close to an election perhaps the congress critters might take a hint?
[...] Everitt mentioned in his comment here, I also received OOIDA’s “Call to Action”. This is where OOIDA sends out [...]
OH BABY, This will be the most major improvement in 30 yrs, this is the first real practical attempt to level the playing field, ya know I just want my fair share of the pie, I’ve always said I never planned on getting rich in this business, I just want to keep my equipment maintained and looking good, pay my bills on time, provide for my family and have a little in the coffee can for a rainy day, as it is now none of the above are being met.
I’m a simple man with traditional morals and values, am I asking to much, am I livin in LA LA LAND, have I missed something?