Trucking Supply and Demand

Supply and demand works everyday in the trucking industry and is especially prevalent in today’s economic downturn causing problems in the industry that affects people’s lives.

Large companies usually have their own dedicated fleet or outsource their transportation needs to a trucking company but a large percentage of the freight market is handled by Third Party Logistics companies (brokers). Most brokers will have dedicated customers and will have several trucking carriers they have relationships with to be able to call when one of their customers’ needs something shipped.

When a company is ready to ship something by truck their logistics company will request a bid from the carriers they deal with regularly and will be able to ship their freight with the lowest bid. Sometimes, because of a myriad of reasons there isn’t time to wait for a formal bid process so the broker will put his freight on an open market. Either by sending emails to all of his known carriers or by posting the shipment to an internet load board. Then he waits for a phone call or an email from a carrier and will negotiate a price.

Trucking companies will list their available trucks on a broadcast email sent to brokers they normally deal with or post their available trucks on the internet and wait for calls from brokers that have freight.

Depending on a number of factors including what area of the country and the time of year, the freight and the trucks are not always evenly matched. Even in the best of economic conditions there is an uneven distribution of freight in this country, causing an oversupply or under supply of trucks in certain areas of the country. This has always been a part of the bidding process. In certain parts of the country trucking companies know they will have to take a lower price to have a shipment than in others. And the reverse is also true that in some parts of the country a broker knows he will have to pay a higher price in order to outbid his competitors for the limited number of trucks available.

Because of today’s economic downturn there isn’t as much freight being shipped by truck as there was a few years ago. This has caused an over capacity of trucks across the country, causing truck companies trying to stay afloat to underbid their competition so much it eventually puts them out of business.

Right now, smaller trucking companies and individual truck owners are going out of business and having their equipment repossessed at record levels because there isn’t enough freight to keep everyone in business.

Eventually, enough trucking companies will have gone out of business that the freight volumes and the number of trucks will be more equalized. Trucking companies will be able to charge enough money to cover their expenses and not have to worry about someone undercutting them so much that it’s unprofitable to haul anything. This will raise shipping rates which will cause the cost of goods on the store shelves to rise even more than they are rising now with normal inflation and other world events.

Even though the high gas prices are in the news and truckers are in the media complaining about the cost of fuel, the cost of fuel is only a small piece of the trucking industries current problems. Every time fuel has crossed certain benchmarks such as $2.00 a gallon and $3.00 a gallon, complaints of fuel costs filled the media. Trucking companies went out of business, but the majority of trucking survived because the rates to haul a shipment by truck kept up with all of the other expenses associated with trucking. Trucking companies go out of business and trucks get repossessed even in good times for a number of reasons above and beyond the cost of fuel.

The overcapacity of trucks versus freight is keeping shipping costs down while at the same time causing individual truck owner and even large trucking companies to claw and scratch for every dime on every shipment. Cutting costs to save money only achieves so much. There are many costs that can’t be cut back on and fuel is only one of them.

Because the truck manufactures have to comply with new EPA regulations that have come out, truck fuel mileage has dropped for the sake of government regulation on emissions.