If you think flooding the market with more capacity will solve the volatility issues plaguing the long haul transportation space, think again. Here’s what Ajesh Kapoor, SemiCab CEO and CoFounder, has to say about eliminating empty miles and the future of freight.
Q: Since capacity is an ongoing issue, won’t ordering more trucks alleviate the issue?
A: Unfortunately, flooding the market with more capacity doesn’t solve the issue of inefficiency, empty miles, or the driver shortage. In fact, in many ways, too much capacity can exacerbate the issues we’re trying to solve.
Although orders for Class 8 trucks in January 2021 were high, about 146% above last year’s numbers, those trucks won’t be hitting the highways anytime soon. And, as we all know, the more trucks we have on the road, the more drivers we need—and in this day and age, they are hard to come by. In fact, hiring and retaining drivers has been a freight industry challenge since day one, and that shows no signs of changing anytime soon.
Think about it...if you inundate the market with too much capacity, the next step in the supply and demand equation will be lower prices. With lower prices, drivers will be paid less, which inevitably leads to a loss of drivers, which tightens capacity all over again. It’s yet another example of the volatility cycle this industry contends with.
Q: If we start paying drivers more money, won’t that eliminate the driver shortage, helping the industry maintain capacity at all times?
A: If it were that easy, we wouldn’t be having this conversation. This is what we know: the only way to realistically retain drivers is to offer fair compensation. But paying drivers more without more revenue coming isn’t feasible for carriers—it's impossible to afford. That’s why making the network more efficient has to be the goal. By eliminating empty miles, we can add capacity without adding trucks and drivers. The drivers we do have will be well-paid, moving full trucks versus trucks that bleed money driving empty, which will help reduce volatility. I believe the only way to eliminate empty miles is through network-wide collaboration, which SemiCab offers as a Collaborative Transportation Platform.
If you’d like more details on what is driving inefficiencies in the transportation industry, then check out our new eBook, “Collaborative Transportation—The Antidote to Freight Market Volatility” today.