Connectrans Logistics - Capacity Constraints
To our valued customers,
In recent months, the supply chain in North America has been experiencing a severe strain on capacity, and there are several inter-dependent market forces that are driving this.
Ø The operational cost of doing business in trucking has increased, and it extends well beyond the cost of fuel, which we’re all experiencing at the pump.
Ø The extreme weather patterns we’ve seen recently are taking a toll on equipment and costs have increased for both buying new and repairing current assets, driven by supply chain challenges and the lack of available parts.
Ø Many drivers in our market have not seen their extended families since the beginning of the pandemic and are now taking longer vacations overseas, contributing to the current driver shortage
Ø Recent cross-border vaccine mandates have not helped, with many drivers pivoting from domestic to cross-border runs. Prior to the mandate 75% of cross-border freight was moved by Canadian drivers and 25% by American drivers. With 10% of Canadian drivers and 40% of American drivers currently unvaccinated, it will take carriers time to balance their driver pool and load coverage.
Ø A few large carriers have begun offering signing bonuses to attract vaccinated drivers, encouraging others to demand higher paying loads with their current companies “or else”. Small to mid-sized companies are under competitive pressures to offer their current drivers competitive loads with higher pay per mile.
These issues and others are responsible for driving rates to historical highs, and we’ve probably have not reached the peak yet, as we can anticipate further capacity impacts from the annual volume spike driven by the looming produce season.
Across North America there is a backlog of freight driven by shifting consumer demand and supply chain capacity challenges. While the transportation market usually experiences a decline in volumes during the first quarter of the year, the opposite has happened this year. The spot-market has been overwhelmed for months, and the recent spikes are rendering most contract rates obsolete. Carriers are being offered unheard of rates to drop their regular lanes to cover priority loads for other customers.
As the experts in providing innovative transportation solutions, Connectrans is working very hard to mitigate the effects of these market conditions, however it’s been a daily uphill battle. We’ve seen the pendulum shift to where Capacity is King, and while we strive to honor contract rates, it is often necessary to provide options based on the current spot market. These options allow our clients to make important shipping decisions based upon the characteristics of their loads. Through our ongoing efforts, Connectrans has also been able to secure “reasonable” rates by pricing on a 3-month term, which can provide some element of cost certainty. Please contact your Account Manager to discuss these and other possible alternatives.
If participating in the spot-market is a requirement, there are several steps we can suggest to best position your shipments to carriers.
1. Book loads as far in advance as possible. 5-6 days on most lanes is sufficient to secure available capacity
2. Book repeat shipments in a predictable manner. For example, if your freight moves weekly book it for the same day and same time every week.
3. Anticipate rate increases. Understand that rates are dynamic and subject to change based on capacity.
4. If you run a spot-board or request rates from multiple carriers we suggest you secure available equipment as soon as possible. Carriers move from a spot-quoted load to a live shipment very quickly.
5. Communicate with your shippers and receivers and ask that they be as flexible as possible with shipping requirements
6. Communicate delays or cancellations well in advance. Have paperwork prepared well in advance. Carriers remember problematic runs and will avoid them
We thank you for your patience, support and understanding. We sincerely hope we return to a more balanced market through 2022.
The Connectrans Team