The term “freight capacity” has been used a lot over the last few years, largely because it is one of the most pressing issues within the shipping industry. The combined effects of the COVID pandemic, the increase in e-commerce and the ongoing shortage of truck drivers in the US mean that managing freight capacity is more important than ever for freight brokers of all shapes and sizes.
Below we will take a closer look at exactly what freight capacity management means in practice for carriers, shipping providers, and freight brokers. In addition, you can find some top tips on how a freight brokerage can implement better capacity management strategies to gain an advantage in a tight market.
Freight capacity management involves managing various processes within the freight system, generally at the front end of the shipping and freight chain. For example, freight capacity management would include the processes of finding, vetting, and contacting suitable carriers. It would then involve obtaining quotes, booking loads, and all the communication that would be sent back and forth to ensure these deals are confirmed and carried out accordingly.
The exact details of freight capacity management can vary slightly, depending on which side of the process you find yourself. So, for example, for carriers it would involve ensuring you have enough equipment and drivers to ship loads. For the shippers there is the element of ensuring your freight gets to where it is going on time and at the best possible freight rates. For freight brokers, however, capacity management usually entails developing better relationships, smarter booking, and the optimization of time management to give you the edge over the competition.
As it has been proven conclusively over the last few years, capacity management is a very important part of successful freight management. As supply chains began to break down during the pandemic it became abundantly clear that managing capacity successfully was going to be key to surviving and thriving. As carriers left hauling empty trailers home or racking up expenses in other ways quickly turned into a shortage as e-commerce surged, finding any kind of carrier quickly became much more difficult. In order to stay ahead of the curve, large freight brokers realized that capacity logistics were key to the success of their business.
Below we have outlined a number of key ways that you can better manage capacity. Some revolve around relationship management and human resources; others are more to do with adopting and utilizing the right technology. What this demonstrates is that to successfully manage capacity, you need to see the bigger picture and focus on a more holistic approach to freight.
The driver shortage has meant that it has become a driver’s market, allowing them to pick and choose the carriers they work for and even the loads they carry. As such, it has become common for even some of the larger carriers to turn down shipments, not because of a lack of available capacity but because of a lack of available drivers.
Driver turnover rates for small fleets can be as high as 87%, so you need to try and work with carriers that have turnover rates that are well below this. Consistent drivers are more productive as they know the routes and procedures better, they make fewer errors, deliver more loads on time, and create a better relationship with customers. All of which has a big impact on capacity and productivity. Which is exactly why you need to find carriers who can retain their drivers over longer periods.
Following on closely from point one above, regional carriers are much better at retaining drivers than large national carriers. That’s usually because they can offer steady runs which get their drivers home on time every night, which is a huge recruiting advantage. This makes regional carriers a much more appealing option, but the benefits don’t stop there. Regional carriers are also more likely to offer guaranteed trucking capacity, a more personal service, and wider windows for pick-up and delivery.
Try and build a good working relationship with the best local carriers and this can create a mutually beneficial working partnership both now and for years to come.
Almost three quarters of shippers do not consolidate loads, even when shipping to exactly the same distribution centers. But by consolidating loads with other retailers, it may be possible to save as much 20% on shipping costs. Full truckloads always represent better value for money, so finding ways to ensure loads are not viewed in isolation can be key to managing capacity in a better way. Of course, it is not always easy for shippers to find partners to share loads, which is where freight brokers can really earn their money.
Using a digital freight matching platform involves using software and machine learning AI tools to help you automate, manage loads in real-time, and ship in a more efficient way. It is designed to allow shippers to match their load demands with available carriers and truckloads.
Digitalization of your supply chain can often be done using subscription or even free load boards. These are marketplaces where suitable freight matches can be made and are particularly useful for less than truckload (LTL) shipping, allowing the consolidation of loads and sharing of shipping expenses talked about in point 3 above.
Shippers and freight brokers should always be asking themselves “how can I make my freight more appealing?”. The driver shortage and capacity squeezes mean you can’t afford to be too demanding. Try to extend delivery windows and be more flexible in scheduling and routing, offer night pick-ups to reduce the impact of traffic or ship on off peak days when demand is lower. As mentioned above, try and foster good relationships with carriers, working with them to develop schedules that suit all parties. Successful capacity management is all about understanding how dual benefits work.
In the past, market conditions dictated that you could often find better shipping rates when carriers were vying for loads on spot markets. But given the recent shift in the industry, it now makes more sense to try and build relationships and contractual relationships with reliable carriers rather than work with spot rates.
In addition, dedicated carriers can also help to drive savings over time as well as offering guaranteed capacity, shared cost efficiencies, and predictable rates – all of which can help you to manage capacity.
The combination of driver shortage, growing e-commerce, tighter restrictions, and unpredictability of the pandemic have transformed the freight market from a shipper’s one to a carrier’s one. As a freight broker, you need to evolve with these market conditions rather than holding out against them. You need to stop viewing freight as a commodity and start seeing it as a collaborative partnership that can build mutually beneficial carrier relationships over time. And by using the enhanced technology available, such as a suitable transportation management system (TMS), you can streamline and make savings by being more efficient in your working practices.
If you are a freight broker and need help finding truckload capacity, then FleetOps is the perfect solution for you. Since 2017, we have helped countless freight brokers discover unique carrier capacity using their existing TMS. We are a certified integration partner with top TMS providers including McLeod, Mercury Gate, Turvo, Aljex, and others.
FleetOps lets you access new carrier capacity right inside your existing TMS in just a few taps. Simply connect your TMS with FleetOps and get your loads covered.
Our goal is to aggregate the right data to make operating your freight brokerage as easy as possible. That’s why we have become the USA's fastest growing capacity finder and digital freight matching platform, supporting more than 227,000 drivers in our network. If you would like to know more about how FleetOps can help you find new carrier capacity inside your TMS, get in touch with a member of our team or try a free demo of our services.
Subscribe to receive more empirical insights like these delivered to your inbox.