Capacity Issue Affecting Transportation in Supply Chain Management
Logistics capacity shortage has been a global phenomenon for years, and it is affecting everyone in the supply chain including retailers, distributors, suppliers, and manufacturers. The capacity shortage in the transportation industry is at its peak due to chronic driver shortage along with the booming of e-commerce in both B2B and B2C businesses.
Let’s take a deeper look at the issue and explore possible solutions.
What is Causing the Transportation Capacity Shortage?
Strong economy – When the economy in the United States is soaring and the unemployment rate is low, those in the job market are less likely to choose a trucking career. Statistics say a trucking job tends to be less popular among the millennials because of the nature the job that conflicts with their lifestyle. In addition, the strong economy leads to an expanded manufacturing economy meaning that the number of new orders and the rate of production in the manufacturing sector are increasing consistently. As a result, it causes an imbalance of supply and demand in the transportation industry.
Explosion of e-commerce – This is the year of online retail and the growth rate for e-commerce transactions has been skyrocketing. E-commerce represented almost 50 percent of all retail sales growth in 2017 in the U.S., with Amazon being responsible for the trend and taking a whopping 70 percent of total e-commerce and retail sales growth in the US. With this trend, customers are expecting faster turnaround and better shipping solutions. This leads to logistics companies struggling to find creative ways to find capacity and satisfy the customers by delivering to and from warehouses, stores, and customers’ residential homes as expected.
Start addressing capacity issues by building strong relationships with your partners. To increase efficiency, you must capture all potential transportation opportunities. This is only possible through maintaining close communication and loyal relationships with carriers, partners, and logistics communities.
Utilizing a third-party logistics provider also can be a good way to secure extra capacity. Most 3PLs have already established extensive carrier networks and partnership with other carriers and shippers. An extensive market database, multimodal support, and industry expertise are among the benefits of using a 3PL support as well.
In addition, logistics providers have access to a wide range of new processes and software as technology advances. Logistics experts keep up with the available technology and make use of the one that is most suitable for each company. Such resources may provide you with analytic data, route optimization, product tracking, inventory control, and much more.
Today, we celebrate the advancement of our economy and the growth of e-commerce, but shippers often experience negative side effects. The winners in the capacity shortage will be the ones who succeed in collaborating, planning ahead, and executing long-term strategies.