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Nearly 500 transportation industry decision-makers and providers recently met at the NASSTRAC Shippers Conference and Transportation Expo in Orlando to learn, network and do business. Discussions among attending shippers and their providers constantly circled back to legislative concerns and capacity challenges that will negatively impact supply chain costs and efficiencies.
We heard perspectives from industry analysts, CEOS with major truckload and LTL carriers, and shippers alike that barriers and constraints are being placed on U.S. businesses and their supply chains.
“We have a new era of trucking regulation in front of us,” said Ben Hartford of Robert W. Baird & Co. “We deregulated the industry in early ‘80s and that regulation was focused on rate structure. Now regulations are centered on capacity.”
It’s predicted that regulations that restrict capacity, such as truck driver hours of service and CSA, combined with operating cost pressures and capital constraints, will undoubtedly cause transportation-related costs to go higher.
For example, while the changes to the driver hours of service rules did not include the proposed maximum driving time reduction to 10 hours, it included a 34-hour restart which will still negatively impact driver productivity. With today’s severe driver shortage, this aggravates the capacity issue and negatively impacts pricing. It’s predicted this will reduce utility 5 percent or more among irregular route carriers.
What do industry experts foresee in terms of trucking capacity? “As the economy shows signs of life, truckload capacities are getting tight,” said Derek Leathers, president and COO of Werner Enterprises during NASSTRAC’s truckload carrier panel. He said that the significant truckload capacity lost between 2007 and 2010 isn’t coming back, and that the recession reduced capacity approximately 20 percent. As for LTL, the industry is still in a margin expansion from the record-low point it hit during the recession, and tight truckload capacity may shift some freight to LTL networks, increasing lane and load density over the next few years.
Some attending NASSTRAC expressed optimism in the growth of domestic intermodal. In fact, April domestic volumes are down from March but are above April 2011 levels. In addition, shipments moving in international containers were flat in April and remain very close to 2011 volumes. And while freight markets rebounded slightly at the end of 2011, international air cargo carriers have been affected by reduced confidence among Western consumers.
In addition, ocean freight also has taken some market share away from the air cargo industry. Nevertheless, shippers appear to be less pessimistic about air freight, which should lead to an uptick in air cargo volumes in the second half of 2012. NASSTRAC continues to monitor all cargo segments closely for its shipper members.wt