Freight capacity management is the process of ensuring that there’s enough freight available to meet the demand. This is a challenging scenario, as the demand for freight transportation can fluctuate significantly depending on a variety of factors, such as the time of year, the economy, and the availability of carriers.
Managing freight capacity has gained limelight as a crucial factor to run a profitable venture for freight brokers. This has especially gained eyeballs post the COVID-19 pandemic. There are other reasons too, such as the rise in e-commerce, and persistent truck driver shortage that have resulted in brokers realising the importance of freight capacity.
What is Freight Capacity Management?
Freight capacity management refers to the process of effectively planning, organizing, and optimizing the allocation of available transportation resources, such as trucks, trailers, vessels, or aircraft, to meet the shipping demands of customers.
It involves coordinating the movement of goods from one location to another while considering factors like the type of cargo, delivery deadlines, routes, and available carrier capacity.
Freight capacity management involves several different activities, such as:
- Forecasting demand: This is based on predicting how much freight will need to be moved in the coming future. This can be done by looking at historical data, as well as factors such as economic trends and upcoming holidays.
- Identifying carriers: This involves finding carriers that have the capacity to meet your freight demand. This can be done by using online freight marketplaces or by working with a freight broker.
- Negotiating rates: Compare rates from different carriers and negotiate the best possible rates with them. This can be done by leveraging your volume.
- Booking freight: This involves booking freight with carriers without any delay. This can be done manually or by using a freight management system.
- Ensuring full load runs: Sometimes when freight is dispatched to remote regions the trucks may return empty. Hence brokers need to ensure trucks don’t run empty but finds freight of return trips too.
- Tracking freight: This involves tracking the movement of freight to ensure that it arrives on time and in good condition.
Benefits Of Freight Capacity Management
Freight capacity management is an important part of the freight transportation process. By effectively managing freight capacity, businesses can ensure there are enough trucks to meet the freight transportation needs and enough freight that meets the demand, while also getting the best possible rates.
Here are some of the benefits of freight capacity management:
- Reduced costs: By managing freight capacity effectively, businesses can reduce their freight costs. This can be done by negotiating better rates with carriers, booking freight in advance, and using freight management systems to track freight and identify opportunities to save money.
- Improved customer service: By ensuring that freight is delivered on time and in good condition, businesses can improve customer service leading to increased customer satisfaction and loyalty.
- Increased efficiency: By managing freight capacity effectively, businesses can improve the efficiency of their supply chain. This can lead to reduced inventory levels, faster order fulfilment, and improved cash flow.
- Increased visibility: By tracking freight shipments, businesses can gain increased visibility into their supply chain. This can help them to identify potential problems and take corrective action before it impacts customer service.
Why Freight Capacity Management Is Important For Large Freight Brokers?
For large freight brokers, who act as intermediaries between shippers (companies that need to transport goods) and carriers (companies that provide transportation services), freight capacity management is of utmost importance. Here’s how:
- Meeting Customer Demand: Freight brokers need to ensure that they have the necessary capacity to fulfil their customers’ shipping needs. Having access to accurate and real-time information about carrier availability allows brokers to respond quickly to customer requests and offer reliable solutions.
- Optimizing Carrier Relationships: Effective capacity management enables brokers to build strong relationships with carriers. By efficiently matching available carriers with suitable loads, brokers can keep carriers’ assets consistently utilized, leading to better collaboration and long-term partnerships.
- Minimising Costs: Proper capacity management helps freight brokers minimise costs associated with underutilised capacity or last-minute bookings. By proactively planning and securing the right carriers for different shipments, brokers can optimise routes, reduce empty miles, and avoid costly expedited shipping options.
- Reducing Delays: Accurate capacity management helps prevent delays and disruptions in the supply chain. By having a clear understanding of available carrier capacity and potential bottlenecks, brokers can ensure timely deliveries.
- Enhancing Efficiency: Effective capacity management relies on advanced technology and data analytics. Large freight brokers can leverage digital platforms and software to access real-time data on carrier availability, shipping rates, and market trends, enabling them to make informed decisions and streamline their operations.
- Scalability: For large freight brokerages handling high volume of shipments, having a well-structured capacity management system is essential for scaling their business. Hence, they can handle increased demand while maintaining quality.
- Risk Mitigation: By maintaining a diverse network of carriers and understanding their capabilities, brokers can mitigate risks associated with carrier failures, capacity shortages, or unforeseen disruptions.
How Large Freight Brokers Can Manage Capacity
To effectively manage capacity, you must look at the wider picture and have a comprehensive strategy.
1. Prefer Carriers With Lower Driver Turnover Rate
Due to the paucity of drivers, it’s a driver’s market where they get to pick and choose the carriers they work for and the loads they desire to transport. As a result, even bigger carriers decline shipments not due to lack of capacity, rather due to paucity of drivers.
High truck driver turnover rate and low retention are consistent problems trucking companies face. Therefore you should strive to engage with carriers who have lower turnover rates.
Drivers who are consistent are more productive as they have better understanding of the routes and processes, make fewer mistakes, delivering more loads on schedule, and building stronger relationships with clients.
2. Utilize Regional Carriers
Regional carriers do a much better job of driver retention than big national carriers. That’s because regional carriers can get drivers back home regularly which is a big plus for drivers. This makes regional carriers appealing for drivers.
Regional carriers in general proffer optimal trucking capacity, personal service, and bigger windows for drop and pick-up of the freight. Therefore it is a good idea to build a healthy working relationship with the top local carriers as this will create a mutually beneficial working partnership.
3. Share Freight With Other Shippers
By consolidating loads with other retailers, shippers can save as much as 21% on shipping costs. Many shippers do not consolidate loads, even when shipping to the same distribution centres. Full truckloads indicates better value for money, so finding ways to ensure loads are not viewed in isolation can be key to managing capacity.
Of course, it is not always possible for shippers to find partners to share loads, but it is a good idea to keep your eyes peeled as this strategy is a sure shot manner of earning a quick buck.
4. Using Digital Freight Matching Platforms
You can manage loads in real-time, automate the process, and ship more effectively by utilizing necessary software and machine learning AI tools with a digital freight matching platform. This will enable shippers to match available truckloads and carriers with their load requirements.
A subscription-based or even free load board can be used to digitally transform your supply chain. These are markets where proper freight matches can be created, and they are especially helpful for less-than-truckload (LTL) transportation since they enable the above-mentioned load consolidation and shipping cost sharing.
5. Be more flexible
“How can I make my freight more appealing?” is a question that shippers and freight brokers should as themselves constantly. This is not the time to be overly demanding when you are aware of the paucity of drivers and capacity constraints.
To lessen the impact of traffic, you should try extending delivery schedules, be more flexible with scheduling and routing, offer night pick-ups, or shipping during off-peak periods when the demand is lower. This will help in freight capacity management.
6. Don’t Rely on The Spot Market
In the past carriers competed for loads on spot markets whereby shippers usually ended up snapping cheaper shipping. However, in light of the current changes, it is now advisable to strive to establish contracts and other agreements with dependable carriers than to rely on spot prices.
Dedicated carriers provide assured capacity, shared cost efficiencies, and predictable pricing, all of which can assist you in managing capacity. Together, these factors can help you save money over time.
Conclusion: Freight Capacity Management
Freight capacity management is a complex process, but it is essential for businesses that rely on freight transportation. By effectively managing freight capacity, businesses can improve their bottom line, improve customer service, and increase efficiency.
Freight capacity management is crucial for large freight brokers to ensure efficient, cost-effective, and timely transportation of goods.
By effectively managing carrier relationships, optimising resources, and leveraging technology, these brokers can provide reliable shipping solutions, maintain customer satisfaction, and achieve sustained growth.
After an Engineering degree and a Diploma in Management I devoted 16+ years working in the automotive industry. My innate skill and extreme passion in writing, encouraged me to adopt it up as a profession. I have been writing for more than 10+ years in the software industry. The 400+ blogs I published are informative, exhaustive and interesting to a professional and causal reader.
