4 Ways Capacity Is Driving Up U.S. Freight Transportation CostsWritten by Paul Forand
We talk a lot about the rising costs of freight and shipping, but why is it exactly? In truth, numerous factors are to blame. Let's take a quick overview of the situation to better understand the overall economic background of shipping in 2015.
Four Major Factors Influencing Shipping Prices Today
1 – Driver Shortage
Due to a multitude of factors, including wages, lifestyle, retirement and government regulations, the trucking industry is facing a current shortage of roughly 30,000 drivers. Carriers have been struggling to find good drivers, and keeping them is proving to be just as tough.
Driver pay has risen at a much slower rate than the average worker’s wages over the past decade, and carriers are having to compensate drivers for the wage gap that has been created in order to attract and retain drivers. While it is uncertain how to best solve the driver shortage problem, higher wages are certainly part of the solution.
2 – Aging Fleets & Equipment
The selling of capacity and the expensive repair costs of aging fleets, coupled with the demand for more fuel efficient tractors, has left many carriers looking to purchase new equipment. A number of carriers have aging fleets and are running trucks that require more maintenance, so they incur more down time. More downtime means the equipment spends less time on the road delivering freight.
Additionally, when the recession hit back in 2008, many carriers sold off unused or extra capacity, and now they are looking to replace that equipment. The demand for trucks and trailers has risen sharply as of late, and truck and trailer manufacturers are struggling to keep up with demand.
3 – Government Regulations
On one hand, it's hard to argue against measures aimed at keeping dangerous drivers off the road. The problem is, more regulations has arguably hindered productivity. New hours of service rules have left drivers with fewer hours to legally drive, and many contend that the change in hours of service has contributed to the overall problem of the driver shortage.
Additionally, some new regulations, such as the electronic log book mandate, require new technology investments, which means carriers, owners and operators are having to shoulder added costs for compliance.
4 – An Improved Economy
On the surface, all indications point towards the country being out of a recession. Likewise, The Federal Reserve has noted in its own most recent "Beige Book" reports that "transportation demand generally improved" and that many regions were having difficulty keeping up with demand.
This boom in trade is great, for the most part. But the dark cloud to go with the silver lining is that right now, the carriers are at or near full capacity.
In the meantime, for advice on finding and keeping quality carriers and dedicated capacity, contact ReTrans Freight for a free cost-savings analysis.