As the nationwide capacity crunch drives into the New Year, third party logistics (3PL) providers offer shippers reliable and cost-effective solutions.
Last year the ‘nationwide truck shortage’, also referred to as the capacity crunch, was a significant challenge for the transportation industry. Carrying over into the New Year, the increase in freight rates and subsequent decrease in drivers continues to impact shippers tremendously. In December it was reported that the ELD mandate was effecting not only trucking, but other modes of transportation. This movement also impacted ‘ocean shipping, intermodal and air freight’. With consumer demands at an all-time high, the outcome of implementing this type of directive has caused a variety of issues. Experts identify increased rates, shipment delays and bottlenecks amongst the most common setbacks shippers face.
In March of 2018, Morai Logistics presented some of the optimized solutions third party logistics (3PL) providers offer shippers. According to Supply Chain Dive,
3PLs can step in and usually save money for the shipper while helping the shipper get a faster route.
While the capacity crunch isn’t expected to go away anytime soon, 3PLs continue to develop optimized solutions to help shippers become proactive to industry demands. This includes a combination of technology integration, networking and Omni-channel opportunities.
This article outlines the various obstacles the transportation industry faces caused by the capacity crunch. Furthermore, it defines why 3PLs remain the prime method to ensure an efficient and cost-effective shipment life cycle.
Impact of Capacity Crunch
The capacity crunch has placed a heavy burden on the transportation supply chain and logistics industry. The Electronic Logging Devices (ELD) mandate that was strongly enforced last year has deterred many drivers from the industry. This creates additional setback for shippers, as a decrease in drivers means an increase in freight rates and inefficient delivery. While strategies to improve driver retention and job satisfaction should be a high priority, the obstacles shippers face is also important.
According to the 2018 Inbound Logistics Annual Survey:
- 81% of shippers felt their biggest challenge was ‘finding capacity’
- 78% of shippers experienced rate hikes
- 94% of shippers stated that ‘driver-related costs’ was important
The capacity crunch forces shippers to seek reliable, alternative transportation methods at cheaper rates. This can be very challenging as competition and a lack of drivers continue to increase costs. However, third party logistics (3PL) provider’s offer optimized solutions to both carriers and shippers that can help alleviate some of this burden.
In addition to price and capacity, a nationwide truck shortage can significantly impact the reliability of deliveries and the quality of customer service. Research on the preferences of shippers who choose ‘motor carriers’ found that:
- 84% say reliability
- 62% say customer service
- 73% say price
- 45% say capacity
3PLs must develop solutions that enable shippers to execute orders efficiently and cost-effectively to meet the increase in consumer demands. The widespread integration of advanced technology has made considerable contributions to the way 3PLs service shippers and carriers. However, below are the most relevant ways these transportation partners can help shippers impact by a capacity crunch.
Cost-Effective Rates Due to their large-scale industry presence, 3PLs are able to offer better rates. They can also negotiate better than small companies or independent drivers, which help offer shippers affordable options.
Network of Carriers Shippers benefit from the substantial relationships that 3PLs have built. This provides access to Omni-channel and intermodal modes of transportation that offer multiple avenues to transport products efficiently.
Digital Maturity The integration of technology will continue to shape the way warehouses operate and communicate. It will also provide companies with the ability to extract data to create insight on forecasts and patterns. 3PLs continue to integrate digital processes to improve the visibility of shipments. In addition, emerging platforms such as predictive analytics also enable shippers to take a proactive, rather than reactive approach, to operations and delivery.
There is no denying that the impact of the ELD mandate and driver shortage has created obstacles for both shippers and carriers. While the capacity crunch remains a top concern to the transportation industry in 2019, 3PLs continue to provide effective solutions.