The immediate future promises to bring one of the most significant disruptions to the supply chain that we’ve seen in decades.   The recent market shift includes two hurricanes, several fires, and the impending ELD mandate on December 18th.  Truck capacity will continue to tighten.  Thus, DMTB is offering a few tips to lessen holiday stress and help prepare for changes in 2018 and beyond.

Here are the key reasons why trucks are as tight as anyone can remember:

1)      The US economy has been steadily improving.  GDP has grown at a 3% annualized rate for two consecutive quarters for the first time in 3 years and unemployment is at a 17-year low.  Continued economic expansion creates more freight movements for an industry that is already at max capacity.

2)      The nationwide truck driver shortage continues to worsen.  Most motor carriers would put more trucks on the road if they could find drivers to hire.  Driver wages will most certainly increase and that cost will be passed along to shippers in the form of higher rates.

3)      Finally, the long awaited Electronic Logging Device (ELD) mandate is now here.  With very few exemptions this means motor carriers are federally required to have an ELD device installed in their truck that monitors hours of service (HOS).  For the first time since 1938, paper logbooks will no longer be an acceptable way to comply with hours of service regulations thereby closing the loophole that has allowed drivers to make up time after being delayed.  Additionally, many small carriers and owner operators are not currently compliant and others are expected to exit the industry once “Big Brother” starts riding with them in the cab.  Those that continue to operate will be forced to reduce their daily mileage to comply with HOS rules and we expect to see enforcement of anti-coercion laws throughout the industry.

How will these issues effect the shipping community?  Simple microeconomics have tilted the scale heavily in the motor carrier’s favor.  With more loads, less drivers, and regulations that decrease productivity, the potential for a prolonged truckers’ market clearly exists. Pricing is sure to rise especially in undesirable lanes and those that require extra time and effort on the part of the carrier (think multi-pick, multi drop).  Shippers who hold trucks up loading or unloading should expect hefty detention charges and higher rates.  Shippers must plan further ahead and communicate their needs well in advance with carrier and broker partners.  3PLs will be relied upon to source capacity in tight markets and many times possess knowledge that can benefit shippers so close 3PL relationships remain critical.  One thing is certain, 2018 will usher in a wave of changes as the shipping community adjusts to a new normal.

Smart buyers, shippers, and receivers have already implemented new procedures or plan to soon.  Just-in-time inventory should be re-evaluated and when possible inventory levels should be increased to allow flexibility in transit times.  Loading and unloading inefficiencies will be exposed and shippers are advised to follow organized schedules that reduce driver wait times.  When presented with options, be flexible and consider any option that delivers in an acceptable timeframe at a reasonable price.