Manufacturers are seeing an increase in rates to transport their freight, whether it be by truck, rail, or air, with capacity shortages playing a large role.
Unfortunately, the rising cost manufacturers and shippers are experiencing is not predicted to get better any time this year. With retiring drivers, new/stricter regulations, increasing fuel, equipment, and healthcare costs, a lingering recession, and a lack of available credit keeping fleets small, the trucking industry is experiencing the tightest crunch in capacity since 2005.
According to a recent survey, 74% of respondents noted an increase in transportation costs within the past year, with 64% noting a 1-10% raise and 10% stating an 11-15% jump (http://www.industryweek.com/articles/no_transportation_relief_in_sight_25323.aspx?SectionID=2).
In order to avoid higher costs, manufacturers are scoping out transportation companies, not based on their quality of service, but by who has the cheapest rates. Those manufacturers who are looking to cut back on shipments by transporting via truckload rather than multiple LTL shipments are noticing a hard time finding the capacity to fulfill their requests.
Another way manufacturers are looking to cut back on increasing freight rates is to use trucking as their primary means of transport rather than rail and air. In fact, Industry Week notes a decrease of 9% in air freight, dropping the number of freight transported via air from 14% to 5% within the last two years.
Even the rail industry cannot compare to trucking as a means of transport. As listed in Industry Week, manufacturers are choosing truck over rail for the following reasons:
-“Rail doesn’t support faster inventory turnover.”
-“Rail isn’t competitive on price and service.”
-“Truckload price discounts have offset some of the rail cost differential.”
-“Companies are willing to pay more for truckload service.”
-“Changes in sourcing have reduced transportation costs.”
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Have you been affected or are experiencing any differences due to capacity shortage? What are you doing to deal with the issue? Let us know by posting your comments below.