Tightening of Capacity Coming from New HOS
June 27, 2013
An expectation of capacity tightening comes as carriers report how they will respond to new HOS regulations taking effect on July 1. The way their shippers work to minimize the impact of these changes will also affect this lowering utilization.
A new Business Expectation Survey from the consulting firm, Transport Capital Partners, shows almost 40% of carriers expect utilization to lower more than 5%, just over 38% expect under a 5% change, only 3% expect no impact and almost 19% have still not determined the full impact of these new regulations.
“This potential reduction in truck capacity is hitting at the same time as spot rates are climbing, reflecting a stronger demand in June. Rates will likely increase further in the months ahead,” says Richard Mikes, TCP partner.
Potential Solutions Vary
Carriers report a variety of potential solutions to mitigating the new rules. Half say they will have to rework routing and load assignments, three-fourths expect new scheduling and detention charges and half want to seek rate increases on impacted lanes.
“Despite the loss of utilization and productivity, many shippers have yet to recognize that they also must be part of the solution. Sixty percent of the carriers report that shippers are still not working with them to minimize impacts,” says Steven Dutro, TCP partner.
Drivers may be squeezed if their miles are reduced because of new hours of service regulations. Few carriers, only 13% plan to raise driver wages to compensate for fewer miles. In the same survey, over 80% of carriers said they would need to see rates increase before they could raise wages.
“The confluence of these HOS rules and rising freight volumes, will inevitably lead to higher rates sooner than later as the industry cannot afford to potentially see drivers leave,” says Richard Mikes.