Translogistics Blog

Capacity Crunch Results in Record High Freight Rates

March 2, 2018

Written By: Translogistics

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Increased Available Loads + Decreased Truck Capacity = RECORD HIGH RATES! 

 As you may have heard freight rates have hit an all-time high entering 2018. You may be asking yourself, what is causing this capacity crunch and why are my freight rates going through the roof? This article will help outline the driving factors of the current transportation market environment: 

ELD Regulation & Mandate (Electronic Logging Devices) 

Mid December 2017, an ELD mandate went into effect nationwide which required commercial trucks hauling US commerce to comply with electronic driver logbook monitoring. Although enforcement of this mandate will not officially begin until April 2018, no one could predict what the true impact would be on available capacity in the marketplace. 

The answer, the impact was huge! Almost overnight as the mandate went effective, transportation rates soared as “hidden” capacity was removed. Trucking companies were now required to comply with laws limiting how long their drivers could drive each day and how many hours they could be “on-duty”. As seen in the two charts below, transportation freight rates quickly hit all time highs due to a sharp drop in available capacity. Spot truckload rates have increased an average of 20% year over year and are continuing to rise. 

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Continued Driver Shortage 

The transportation industry continues to deal with a massive driver shortage. Carriers who are needing to hire drivers and expand their capacity are having a near impossible time finding new drivers. Most hires are drivers who are simply switching trucking companies due to lucrative sign-on bonuses, which is only making trucking more and more expensive. 

 

Summary 

In summary, regardless the size of the shipping organization or their freight spend, freight rates are soaring to record highs. These increases will continue to impact businesses across their supply chains. While slight easing may come later in 2018, rates are not expected to stabilize until early 2019. 

Key quotes from public conference calls:

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