Sourcing freight capacity is always subject to market conditions and the balance of both spot and contract freight rates. However, periods of extreme turmoil, like an explosion of e-commerce amid pandemic, lead to a massive strain on resources and freight capacity fluctuations.
Fluctuations in freight rates reflect changes in capacity and demand. That’s why it is helpful for shippers to know what’s affecting capacity, so they can use that information to build a clear strategy for securing truck space to move their shipment.
The Causes of a Freight Capacity Shortage
Any strain on trucking capacity comes from simple supply and demand. Either demand is higher than expected, or available supply (drivers and trucks) is lower than expected. Each side of the conversation is rooted in market disruption and affected by differing dynamics.
And capacity fluctuates widely from month to month based on overall market volatility.
In some geographical areas, capacity may be extremely tight. In others, it may be manageable. Of course, it helps to have a clear set of reasons for why capacity may tighten:
- Strikes or pushback from laborers and truckers.
- Global lockdowns or political instability.
- Harsh weather conditions.
- Declines of available raw materials for the manufacturing of new equipment.
- Wasted space and transportation due to empty backhauls.
Obviously, this isn’t a complete list. Still, if you are trying to solve a freight capacity puzzle, these five tips will help.
1. Diversify Your Carrier Network
A diverse carrier pool helps keep your shipping rates competitive. At the same time, diversification opens the doors to more carriers with specialty services or expertise that can help your team thrive through disruption.
2. Enable True, Meaningful Freight Transportation Optimization
For example, using transport logistics software to manage reverse and forward logistics in tandem helps shippers identify weaknesses and account for total demand to better plan volume needs.
Shippers can also apply the same principle on a street-level basis to optimize every leg of transportation. Ultimately, more optimization means more access to capacity regardless of mode.
3. Think About Performance and Cost of Transportation
4. Know the Local, Regional, National, and International Freight Capacity Markets
Understanding freight market conditions is another critical tip to overcoming a freight capacity crunch.
For example, many freight management parties apply a freight rate index to understand the most aligned rates within a given market. This approach ensures shippers tender a load at acceptable rates, reducing the risk of rejection.
5. Use Technology to Source Dense Capacity Where Possible
In a sense, it’s all about the Gig economy’s evolution and getting more small-business owner-operators involved. Using digital freight technology makes it easier to access a pre-vetted network of mid-market carriers that can help your company when capacity tightens. Additional opportunities for using technology to solve a freight capacity shortage include freight pooling and consolidation. This reduces the burden of moving partial truckloads and helps keep carriers’ trailers full.
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There will always be a strain on transportation capacity. Even in the best market conditions, freight capacity will be volatile somewhere.
The informed shipper is well-equipped and prepared to overcome those obstacles by working smarter, not harder. “Smarter not harder” is a good description of the MercuryGate Digital Freight Marketplace.
Start working smarter by putting the power of digital freight to work through MercuryGate TMS. Ready to learn more about the State of Digital Freight Networks?
