Tight trucking capacity worries shippers
Staff -- Purchasing, 11/4/2004 2:00:00 AM
A recent survey of shippers found that truckload capacity is the tightest it has been in seven years and pricing remains firm heading into the peak-shipping season. The recent Bear Stearns survey found that 72% of respondents described truckload capacity as "tight" or "extremely tight" in the second quarter. Shippers expect truckload rates to increase 2.7% in the next year and less-than-truckload rates to jump 2.3%.
Eighty percent of shippers say those rates are increasing, in part, because they are paying some accessorial charges or increases as a result of the proposed Hours of Service (HOS) regulations covering the hours truck drivers can be on the road. Shippers reported having difficulty finding drivers to take loads as a result of the HOS regulations.
In addition, the survey found that capacity is being squeezed by "the considerable industry consolidation" that has taken place over the past few years. "Many smaller, underfunded truckload carriers have gone out of business as a result of rising insurance costs, increasingly stringent requirements for financing, and weak used-truck prices."
Less-than-truckload capacity appears a bit less tight than truckload, but still pricing remains firm. The Bear Stearns survey found that 51% of shippers termed LTL capacity at "significantly tighter" or "somewhat tighter" than it was a year ago while 43% of shippers expect LTL capacity to stay firm in the next 12 months.
The tight trucking capacity is driving more volume to rail and intermodal, despite declining service levels in these two modes. The percentage of volume shifted from truckload to rail was 4.8% in this survey, up from the 2.9% seen in the first quarter of 2004. Survey respondents rated railroad service a 2.4 with a 5 being the highest, which was down from a 3.1 a year ago. "We believe the primary drivers of the weakness in rail service levels were rail crew shortages and network and locomotive capacity constraints, which were amplified by the current strong volume environment for the rails," the report said, adding that five of the six Class I railroads registered double-digit year-over-year declines in service level ratings.
Intermodal volumes are also growing, according to the survey, while service levels continue to decline. The Bear Stearns report finds intermodal service levels have declined for seven straight quarters.
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