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Seven Factors Affecting Freight Transportation Today

Nov 07, 2016

This year has produced many changes impacting freight transportation. It has also seen many challenges continue in the industry. What are these changes and challenges and how are they affecting freight transportation today?

 

Factors Affecting Freight Transportation.jpg1. Freight volume is down – According to Cass Freight Index Report, shipping volumes fell about 6 percent year-over-year in May of this year. It was down for all modes of freight transportation, based on the report.

2. Capacity – Many trucking companies purchased new trucks during the last year to expand their fleets and replace older ones. With freight volumes down there’s been excess trucking capacity making it possible for shippers to demand lower rates, especially in truckload freight. This is expected to improve due to the drop in Class 8 vehicle orders and the driver shortage.

3. Fuel cost – Although the cost of fuel has been down it is expected to rise in the coming months and year due to many factors including the reduction in production and the recent pipeline explosion among other                                                                      factors.

4. Drivers (wages and availability) – The truck driver shortage is an issue created by a mix of too many small package shipments, improper packaging, inefficient routes, and the retirement of aging drivers. There aren’t enough new drivers and hiring ones without a Commercial Drivers License is costly and time-consuming since they take 3-6 months to acquire. Some of the current drivers transitioned from the energy industry when it took a hit and are expected, due to higher pay, to return to the Energy sector when it recovers.

In an effort to attract and retain drivers while trying to reduce turnover, carriers are starting to offer higher wages plus increased benefits and perks. This, of course, increases carrier costs and is expected to increase freight costs as well.

5. Increased focus on safety – Passage of the FAST Act is bringing changes focused on safety. The FAST Act is expected to improve the flow of logistics by investing in badly needed repairs and expanding infrastructure capacity at bottlenecks along routes. It provides $305 billion in funding for surface transportation through 2020. Of that, $226 billion will go to the Federal Highway Administration and 10% will be dedicated to rail, port and intermodal projects.

The FAST Act also initiated critical steps to reform the FMCSA’s CSA safety monitoring system by requiring that their method of calculating these scores be updated for improved accuracy. As a result, CSA scores have been temporarily removed from public view during this process. Carriers are focusing on increased safety to ensure CSA scores don’t negatively impact their business when they are made visible again.

6. A strong US Dollar – Brexit and other factors have yielded a strong US dollar. Unfortunately this results in reduced export activity and an overall reduction in international shipping…one of the causes of reduced freight volume.

7. Increased regulation – Revisions to the Hours of Service and the upcoming requirement of Electronic Logging Devices are two examples of regulations impacting the industry. These impact productivity in the industry by managing the hours that truck drivers may work during a time when driver availability is already an issue. Initially, as companies implement ELD’s, this will create an increase in costs to carriers in the form of hardware, software and training.

 

These are an array of changes and challenges that will continue to evolve in the coming months and years. Many of these will cause an increase in shipping rates due to increased costs. As a shipper you may be concerned with containing or controlling the potentially rising cost of shipping. At American Group we can help you navigate the shipping process to minimize the impact of these changes and challenges to your bottom line. Contact your representative or give us a call at 866-553-6608 for Shipping.Simplified.