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Shippers Buying Up Freight Capacity in Harvey’s Wake

Posted by TMW Systems on Aug 29, 2017

Shipping capacity is the last thing millions of Texans have on their minds as residents begin rebuilding following the devastation caused by Hurricane Harvey. After making landfall August 25, 2017, the Category 4 storm soaked areas in and around Houston with 50-plus inches of rain. Lives were lost; homes flooded; businesses and their equipment destroyed. As flood waters recede, experts predict recovery and rebuilding costs will top $150 billion.

The destruction across southeastern Texas is widespread. Several days after Hurricane Harvey made landfall, FedEx had suspended service to approximately 250 cities in Texas and about 45 more in neighboring Louisiana. According to FreightWaves.com, one “big box retailer” said more than 150 stores, or about 5% of its national capacity, had been closed by flooding.freight-capacity

Recovery, rebuilding and restocking efforts will siphon freight capacity from the rest of the country just as capacity in general was tightening due to the upcoming federal mandate that truckers log their hours electronically. As a result, shippers who had begun buying capacity before they actually needed it will be better positioned to ride out the storm.

Implementation of electronic logging devices (ELD) is expected to force some drivers—and possibly some small fleets—from the industry because they will not want to implement electronic logs. Fewer drivers and fewer trucks will force fleets to increase both driver pay and freight rates.

Werner Enterprises CEO Derek Leathers said trucking will lose 3% of its freight capacity when the ELD mandate takes effect December 18, 2017. Leathers made the prediction during a webinar presented by Transport Topics, which is published by American Trucking Associations.

Werner has more experience with electronic logs than any other fleet, he added. The Omaha, Nebraska, company voluntarily began using ELDs 20 years ago.

Writing at JOC.com, William B. Cassidy said capacity among large truckload carriers is “nearly 16 percent below peak pre-recession levels in late 2006.” And the FMCSA ELD Mandate will “put more upward pressure on rates, possibly as early as the second half of 2017, and certainly by early 2018, though by how much is an unknown.”

As the shift to ELD and the recovery of Hurricane Harvey combine to tighten freight capacity into Fall 2017, trucking companies that can leverage transportation management software will be better positioned to secure the business they want.

Fleets lacking historical pricing and equipment utilization data will be at a disadvantage. Competitors who rely on transportation management software will have tools that include market-rate indices showing historic rates for various shipping lanes, as well as a searchable database of their own rate history.

Carriers who employ analysts to evaluate the same shipping lanes annually are typically very good at deciding which shipping proposals to secure. Use of TMS with a market rate index allows a true analysis of lanes old and new. The market rate index guides decisions about a lane’s profitability, showing how the industry has bid various lanes.

Another advantage to fleets using TMS is the ability to aggregate data requested by shippers into a searchable database. That knowledge base captures all bid information, including special considerations and number of times the fleet has responded. The knowledge base will outlast an employee who transfers to a new job and takes the skills and expertise with him or her.

For a closer look at how electronic logging devices play a vital role in a true “connected enterprise” and why ELDs are an important business intelligence resource, download our whitepaper, “ELD Compliance: Are You Heading Down a One-Way Street?

Topics: Transportation Management Software, ELD Mandate