4 Reasons Freight Carrier Rates Will Continue To Rise In The U.SWritten by Paul Forand
It's no surprise if you're seeing your freight rates slowly rise. Both the domestic and international shipping markets are facing huge new challenges, and those challenges are proving expensive to overcome. Carriers are having a harder time meeting demand. They're getting squeezed on multiple sides, and ultimately the result is higher prices. Let's take a look at the larger situation, and why this is becoming an issue for so many carriers and their clients.
1 - Driver Shortage
If continued at the current pace, the driver shortage could potentially reach 250,000 by the year 2020. Though not the only factor in the solution to solving the driver shortage, wage growth for drivers is a large part of it. Carriers are already squeezed razor thin on their margins. They will continue to rely on rate hikes for shippers to help them pay for the wage hikes needed for attracting, retaining, and paying drivers.
2 - Government Regulations
Bureaucratic red tape is something nobody wants to deal with, but it's a reality. Some truck drivers are seeing the increasing regulatory requirements as a sign it's time to move on to another profession. Couple the increased costs of compliance with fewer work hours stemming from changes in the hours of service rules, and many drivers see no other alternative but to retire or find another profession. More government measures aimed at safety that will arguably drive operating costs for compliance higher include driver health and drug testing requirements, speed limiters, and electronic log books, among others.
3 - Aging Infrastructure & Congestion
Per the American Society of Civil Engineers, close to one third of all roads in the U.S are in poor or mediocre condition. There has been no long term highway trust fund bill passed in years, and the current short term funding solution is set to expire in May 2015. America's roads and aging infrastructure is causing delays, congestion, and lost production. In some cases, drivers have to sit idle in traffic for hours at a time. Poor road conditions also contribute to higher maintenance costs of vehicles/trucks.
4 - The Economy
It seems as if the economy has bounced back from the recession, and there is more freight activity in general. Since there is more demand for freight and capacity, the carriers can charge higher rates. When demand outstrips supply, a higher rate for a product or service can be commanded from the supplier(s) of that product or service.
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