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Capacity Shift – How less capacity may impact freight rates

Published: January 27, 2025 | Author: Ron Costello | Comments: No Comments

Capacity Shift: How Less Capacity May Impact Freight Rates

The freight industry is experiencing a “capacity shift” where reduced transportation resources—due to factors like labor shortages, regulatory changes, and global disruptions—are driving up freight rates. As demand for shipping remains strong, fewer carriers are available, leading to higher prices for moving goods.

How Reduced Capacity Affects Rates:

  1. Increased Competition: With less capacity, shippers compete for available space, raising prices.
  2. Volatile Spot Rates: One-off shipments see significant price increases, as carriers prioritize higher-paying loads.
  3. Delays and Bottlenecks: Reduced capacity can cause service disruptions, leading to higher costs and delays.
  4. Operational Adjustments: Carriers may invest in new equipment, but this won’t immediately resolve capacity shortages.

What Can Shippers Do?

  • Diversify Transportation Modes: Use multiple shipping methods to avoid dependency on one.
  • Identify your most trusted Logistics Provider: Have regular discovery meetings to optimize scheduling and communication.
  • Optimize Supply Chain: Improve inventory management and plan shipments in advance.
  • Stay Agile: Monitor capacity changes to adjust plans quickly.

As capacity shifts continue, shippers must adapt to stay competitive. By planning ahead, negotiating better contracts, and adopting new technologies, businesses can navigate the challenges and keep costs under control.

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Ron Costello

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