Truck Industry Capacity Under Pressure as Shippers Face Logistics Constraint

February 26, 2011

Trucker to Trucker - the best place to find trucks for sale on the Web - will look at the limits shippers are experiencing today in freight services:

Shippers across the country are facing severe restrictions on their ability to ship cargoes across the country. The problem is that the trucking industry is still ramping up capacity after the recession caused carriers to cut back on their capacity – drivers and equipment are in desperately short supply, particularly drivers.

FTR Associates operates a Shippers Condition Index (SCI), which acts as a measure of the available logistical and freight services supply status for the country. The SCI takes a wide variety of market factors into account to produce an index of how the state of the freight market impacts upon shippers. A positive number indicates that the market factors favor shippers, however a negative number demonstrates restrictions and constraints that shippers face due to logistical constraints. In addition, the SCI guide shippers on how they can negotiate for logistical pricing – positive numbers indicate a seller's market and truck carriers must control pricing to remain competitive. Negative numbers mean carriers can charge a premium for freight haulage because demand is outstripping supply.

The SCI remained neutral in January 2011, which was not much of a surprise however in February it has dipped into negative territory. Shippers are now finding that they cannot source all the logistical services they need to operate effectively, and trucking companies are racing to service the extra business and build additional capacity.

In 2011, there is an anticipated 200,000 new truck driving jobs set to be created, with an equal number in 2012. These late 2010 predictions are increasingly looking like they are on the low end of expectations, and additional pressure is being placed upon company recruiters to fill driver slots.

Normally, the winter period is a slow for the trucking industry after the heavy run in to Christmas with Thanksgiving through to Christmas periods being exceptionally busy. The slide of the SCI into negative territory so early in 2011 should be acting as a serious warning signal to shippers to pay close attention to sourcing their haulage needs during the forthcoming year or face severe constraints on their ability to get products to market.

Normally, the SCI index does not start registering a downward movement (and not necessarily negative) until March, but this year the recovery is providing an additional boost to the industry. The immediate outlook is that shippers are only seeing the very beginning of a dramatic tightening up in the trucking sector, which is good news overall for the economy in the short term, but will need to be addressed very quickly by the trucking industry.

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