Preparing for Capacity Constraints as the Market Rebounds
The freight market remains in flux as supply chains shift to address demand volatility triggered by the COVID-19 pandemic. While the unprecedented drop experienced during the first half of 2020 makes forecasting the recovery more difficult, some industry experts suggest factors are pointing to capacity constraints as the market stabilizes.
In late April, Freight Waves reported that Noel Perry, the Transportation Intermediaries Association’s chief economist, anticipates volumes to fall into the third quarter and then begin climbing. Although he predicts steady growth, there could be a quick rebound when businesses suddenly open. The result? Surprisingly, freight markets may be facing a capacity crunch reaching 100% utilization by the end of the year.
Factors Driving Tighter Capacity
What factors are contributing to tighter capacity projections in the marketplace? Perry outlined several current issues that could impact available capacity once the market turns around:
- Reduced volumes and low rates have resulted in trucks being taken out of service
- Up to 600,000 trucks may be taken off the road through Q3 of this year
- Volume levels are estimated to decline 20% in 2020
- Because spot rates have fallen significantly to lowest expected levels and contract carriers are eager to accept every tender, the spot market will be less attractive than in previous weak markets
- Many drivers have left the declining marketplace
Perry noted that because the industry can lag behind market trends, capacity will likely be tight by the time drivers start being added. He foresees a time (potentially late 2020 to mid-2021) when operators will be racing to find trucks and trying to rehire truckers they have laid off. Pricing should also improve by this point in the recovery.
Preparing for the Market Rebound
When securing capacity becomes increasingly difficult, traditional, time-intensive methods for finding available transport can’t keep up with demand. Relying on truck load boards and your own networks is not enough when capacity is severely limited. You will need tools that provide verifiable capacity information and market data to successfully navigate the anticipated capacity crunch later this year.
Descartes MacroPoint™ can help. We provide advanced carrier sourcing and capacity matching capabilities for freight brokers to source new carriers, view overall market capacity and automatically match loads to open capacity. Here’s how:
- Artificial intelligence (AI)-based capacity matching: Receive the best-ranked carriers who actually have assets available. You can cover loads in a fraction of the usual time with a ranked list of carrier matches.
- Market visualization: See capacity both in and out of your carrier network to map open loads; learn more about market conditions to determine which loads may be tough to cover; and quickly identify loads that represent the best matching opportunity.
- Capacity co-op: Join an opt-in network where freight brokers can selectively choose to share unused capacity in a secure way. You’ll gain significantly more access to capacity in return and limit service risks. This is a superior alternative to private portals with limited participation and traditional freight load boards that contain outdated and unverified data.
If industry expert forecasts are accurate, and today’s volatile freight market stabilizes in late 2020 before experiencing a snapback, now is the time to prepare for a subsequent capacity crunch. With Descartes MacroPoint’s load matching tools you can be more competitive and grow your business with newfound capacity.