If your business is looking to book truckload freight for your products or other operations, you might have noticed that truckload freight rates are significantly pricier than usual. On top of that, truckload capacity seems to be decreasing. What does this mean, and how will it impact your business?
This detailed guide will break down what truckload capacity is, how it works, and how truckload capacity could change shortly.
What Is Truckload Capacity?
Truckload capacity is how much equipment and drivers can move shipments around. Think of truckload capacity as the total capacity of truckers/the trucking industry to move freight around.
When truckload capacity increases, freight rates go down since there are more drivers on the road and more room for freight. When truckload capacity goes down, the reverse happens; freight rates increase because there are fewer truckers on the road and less room for everyone’s cargo.
Truckload capacity is further broken down into two major types.
What Is Seasonal Capacity?
Seasonal truckload capacity is dominated by two primary seasons: the produce season, which begins in April and ends around July, and the peak season, which starts around August and ends around October.
Produce season is dominated by produce harvesting, which hits its maximum peak between the above months. Produce farms and manufacturers need many available trucks to haul loads of fresh produce around the world or country.
Peak season is the most significant time for shipping retail products around the country. This is driven by the return to school and everyone preparing for holiday freight loads. Around peak season, shipping volumes increased drastically around the country.
What Is Regional Capacity?
Regional truckload capacity concerns how easy it is for truck drivers to find loads in the area to bring to other places and make profits (those return loads are called “backhauls). Generally, suppose a site has a lot of consumption and a high population but low manufacturing and distribution numbers. In that case, it has low regional capacity since shippers won't easily be able to find backhauls to bring back with them.
Examples of regions in North America with low truckload capacity include Phoenix, Denver, Dallas, Seattle, and Orlando.
What Causes Capacity To Rise and Fall?
- Weather Conditions
- Seasonal Variations
- Labor Shortage Regulations
- Costs
Weather Conditions
The current or projected weather can impact truckload capacity for a given area. For example, suppose the roads are icy and hazardous. In that case, truckload capacity decreases since trucks must move more slowly, and fewer truckers will be willing to make the trip into the dangerous area.
Conversely, truckload capacity usually increases if weather conditions are hospitable and attractive.
Seasonal Variations
As noted above, seasonal variations can impact truckload capacity. During the production and peak seasons, truckload capacity tends to be at its lowest since the industry anticipates needing to move a lot of freight, and customers have to pay top dollar for a room on trucks, which are more often “full truckload” or subject to “capacity crunch.”
Truckload capacity usually increases during the “off-seasons” since shipping companies are looking for loads to carry. They may lower their prices to attract new customers.
Labor Shortage
In addition to the above factors, truckload capacity can be and currently is affected by a labor shortage. In fact, the US is now in a major truck driver shortage at the time of this writing.
The average age for truck drivers is over 50, and it is becoming harder for the industry to attract new truck drivers. All of this has resulted in lower truckload capacity since fewer big trucks are on the road to carry freight.
The pandemic contributed to the current freight market labor shortage as well. However, North American trucking companies have yet to bolster their ranks. Organizations like the American Trucking Associations are trying to get new long-haul truckers to enter the freight transportation market.
Regulations
Specific regulations can heavily impact truckload capacity and make it go up or down.
Hours of Service (HOS)
Businesses with flexible hours of service can enjoy higher truckload capacity. If, for instance, a business can receive a load of freight in the middle of the night, they can buy shipping from a company for a lower price. Businesses with less flexible hours of service may find truckload capacity lower.
Emissions Standards
Regional emissions standards can impose limitations on shipping companies or individual trucks. Areas like California, for example, are governed by the California Air Resources Board (CARB). This organization limits who can carry freight throughout California, which tightens truckload capacity by minimizing how many people can deliver shipments to businesses in this state.
Electronic Logging Devices (ELDs)
ELD mandates have created a trucking capacity shortfall due to shipping companies' requirement to track and regulate their trucks/drivers more stringently. Electronic logging devices limit flexibility in the trucking industry, which tightens efficiency.
Costs
Of course, costs for fuel, tolls, and other things can further increase how much money shipping companies or truckers have to spend to move freight around. The higher costs become for the industry, the lower trucker capacity sinks for consumers.
How Are Truckload Capacity Rates Determined?
- Handling
- Loading and Unloading
- Shipping Distance
- Time Requirements
- Insurance
Handling
Truckload capacity rates are determined by shipping companies using several important factors, the first of which is handling.
The easier it is to handle a shipment, the cheaper rates usually are. The harder it is to drive a load, the more time the shipping company has to spend on it, and the higher your rates will result.
Loading and Unloading
Similarly, the more accessible freight can be loaded and unloaded, the lower truckload capacity rates are in most cases. For example, you might get lower shipping rates if you have a dedicated receiving dock for your business’s freight.
Shipping Distance
Of course, the shipping distance required for your chosen freight can impact truckload capacity rates. Price per mile usually goes down if you ship across the country, although such rates are also often higher than if you just need to ship freight to a neighboring state.
Time Requirements
Expedited freight requests cost more than more leisurely freight shipments. Furthermore, businesses that need their freight delivered at a specific time may face increased rates due to the constraints this can place on shipping companies’ schedules.
Insurance
Freight insurance can provide peace of mind for business owners by covering you against financial loss if your shipped freight is damaged or destroyed. But it also increases the bottom line cost you have to pay for shipping services.
What To Do Next
Truckload capacity is currently lower than usual, and freight rates are higher than average. While the current situation isn’t the best for your business’s bottom line, it won’t last forever. In the meantime, it may pay to contact knowledgeable shipping professionals to help you achieve your goals.
RPM is the nation’s leading finished vehicle transportation provider. We move over 30,000 vehicles monthly for large automotive companies and can help you meet your shipping goals. Contact us today to learn more.
Sources:
Seasonal Produce Guide | SNAP-Ed
Peak shipping season ahead of the holidays is about to begin for a volatile supply chain | CNBC
The Real Reason America Doesn’t Have Enough Truck Drivers | NY Times
