3 Ways to Avoid a Tight Capacity Heart Attack

Here’s a way you can help your heart—and it doesn’t even require giving up steak. All you have to do is make sure your company will be ready in case of a trucking capacity crunch in 2011.

Even with high unemployment, a double whammy of reduced capacity and tighter regulations could create significant driver shortages.

The recession’s put some trucking companies right out of business, while those who’ve survived have made major cuts to staff—not just to their drivers, but to the people who hire those drivers. Most experts doubt trucking companies have enough faith in our current economy to saddle themselves with the fixed costs of staffing back up or adding equipment anytime soon.

Meanwhile, the federal CSA legislation imposes stricter safety standards, which will eliminate some drivers from the pool, and changes in hours-of-service rules proposed by the Teamsters union would reduce from 11 to 10 the number of daily road hours.

Finally, legislation pending in Congress seeks to improve compliance of these hours-of-service rules by requiring carriers to use onboard trip recorders. This will eliminate the current paper logs which many expect are falsified.

As a result of all these factors, truck contractual pricing is already rising, and some experts are predicting a major crunch starting next year.

So what can you do to now to be ready if and when the crunch comes? Below are three ounces of prevention worth a TL of cure.

1. Start by doing your due diligence.

Schedule a block of time on your calendar that you can spend looking carefully at your current carriers in your supply chain infrastructure. How well are they serving you now? How well will they serve you if/when capacity gets tighter? What gaps need to closed? Do you have enough safety stock in case some your core carriers decide one of their core customers is more important than you?

You may find upgrades in your own infrastructure are required, and/or that you need more access to carriers better suited to or more focused on your company’s needs.

As larger trucking companies evolve sophisticated logistics offerings, a variety of carriers have cropped up that can create efficiencies based on very specific customer requirements—but you’ll have to look at your supply chain strategically to identify those key needs.

Some shippers are exploring options like outsourcing more of their shipping, either to asset-based or non-asset based carriers, to expand their infrastructure without taking on additional fixed costs.


2. See if your—or your carrier’s—technology could stand some upgrading to better predict demand.

It’s easier to avert a capacity problem if you have a little warning.

In times of tight capacity, you need to be able to integrate key information around customer priority, rate changes, changes in quantities going to different locations, etc.

Technology that helps you quickly understand relationships among variables allows you to forecast upcoming periods of tight capacity and make informed decisions quickly.

If your company has the in-house human capital and technology infrastructure needed to track these variables, you may find outsourcing to a non asset-based carrier is a good option during spikes in demand.

In cases where transport isn’t a core competency, you may already be outsourcing some parts of your supply chain to a non-asset based 3PL.

If you rely on one of these outsourced logistics providers during spikes in demand, make sure their technology captures supply of equipment on a daily and weekly basis to take advantage of back-haul opportunities.

3. Consider ways to build more and better relationships with carriers.

It seems like a lot of work to mess with when capacity is adequate, but laying the groundwork now to have access to more or different lanes in the coming year will create flexibility and make your life a lot less stressful in the long run.

If your due diligence is suggesting that your current carrier may not be able to accommodate any growth you might expect, now’s the time to explore options.

There’s been explosive growth in the 3PL arena and some shippers are beginning to recognize the value in taking advantage of their huge networks of carriers for accommodating spikes in demand.

Contrary to what you might think, using a broker in some cases may offer more competitive pricing than working directly with an asset-based company. The larger 3PLs are able to leverage total volume, arrange back-hauls and avoid fixed operating expenses.

If you’re considering expanding your portfolio of carriers to include a 3PL (a.k.a., non-asset based carrier or broker), use the following criteria to evaluate any candidates:

1) How well can the company trace your freight? Make sure any 3PL you may work with has technology to capture up-to-date information for every truckload. Another good failsafe is a company that requires direct communication with its drivers. This way, the 3PL can retrieve real-time tracing information, 24 hours a day, from the person who is actually attached to the load. Their technology should also automatically communicate this status to the shipper.

2) Can the 3PL assure that your cargo will be protected from theft or damage?  They should regularly confirm the validity and limits of every driver’s or carrier’s auto and cargo liability coverage, assuring that ample coverage protects you—well before the freight is loaded onto a trailer.  Also, check that they invest in contingent policies for added measure.

3) How’s the company’s credit rating? If it’s in any way tarnished, it could indicate the broker is engaging in underhanded practices like contracting a trucker, using his POD to bill their client—and then never paying the trucker. You might also check to see if they’re members of the TIA/P3, an ethics watchdog organization dedicated to elevating the image of good brokers.

4) Everyone’s feeling the pressure to do more with less, so don’t procrastinate on selecting carriers. Find two or three 3PLs whose experience, credibility and security procedures give you cause to feel confident your company can face a capacity crunch without losing customers or market share.

 By Jeff Lantz, President, C. L. Services, Inc.

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