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Survey says Carriers Risk Dying by a Thousand Cuts

Posted: August 1, 2014

CHATTANOOGA, TN — Transport Capital Partners (TCP) Second Quarter Business Expectations survey are showing that carriers are still hesitant to add capacity.

According to the survey, 71 percent of carriers expect to add little or no capacity, a 6 percent increase from last quarter.

The reason for the drop in confidence, said Richard Mikes, TCP Partner, is because the “industry is certainly bearing the burdens of more federal regulation, scarce drivers, an anticipated jump in 2013 taxes, and hearing more pundits ponder recession.”

TCP also said that more carriers believe they are not getting decent return on investment for their equipment compared to a year ago — 51 percent versus May 2011’s 47 percent.

That high percentage of carriers unhappy with ROIs could also be a reason that carriers are unwilling to add capacity, TCP noted.

Coupled with shifting driver demographics, CSA putting pressure on drivers, an increase in turnover and pay, is, said TCP Partner Lana Batts, “similar to causing carriers to die by a thousand cuts.”

All that uncertainty has carriers unsure as to how shippers will respond, said TCP. Thirty-five percent of smaller carriers think that shippers will do nothing, compared to only fourteen percent of the larger carriers. Larger carriers think that it is more likely that shippers will use long-term dedicated services (29.3 percent) or favor larger fleets (26.7 percent).

“Dedicated is clearly a win-win option for shippers and carriers over the long run, and dedicated is rising in popularity with our carrier contacts, as well as looking for acquisitions,” said Mikes. “It allows the current low interests rates to be locked-in, gives shippers a custom and controlled base line capacity not subject to the spot market over 5 to 7 years, and removes the uncertainty of steady volumes to justify an investment.”

With uncertainty about capacity, carriers are unsure as to how shippers will respond. Thirty-five percent of smaller carriers think that shippers will do nothing, compared to only fourteen percent of the larger carriers. Larger carriers think that it is more likely that shippers will use long-term dedicated services (29.3%) or favor larger fleets (26.7%). “Dedicated is clearly a win-win option for shippers and carriers over the long run, and dedicated is rising in popularity with our carrier contacts, as well as looking for acquisitions. It allows the current low interests rates to be locked-in, gives shippers a custom and controlled base line capacity not subject to the spot market over 5 to 7 years, and removes the uncertainty of steady volumes to justify an investment,” says Mikes.

If you would like to participate in the survey, visit TCP here.

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