Severe Scarcity of US Trailers Frustrating Shippers

Trailers have never been more in demand, or harder to get. That is making it harder for trucking companies to meet increasing shipper demand for drop-and-hook trailer pools. In the long term, however, the 53-foot trailer may replace the truck as the basic unit of truck capacity.

In this case, consolidation does not mean acquiring large numbers of smaller carriers but bringing those carriers into trailer pools managed by large companies as “power-only” providers, increasing capacity for high-volume shippers.

“Having a real-time view of where the trailers are and whether loaded or unloaded has a huge impact on making trailer pools successful,” Will Chu, co-founder and CEO of logistics technology company Vector, said in a May 17 interview. “The trailer is very much a shared resource across companies.”

Trailer manufacturers, like truck and chassis manufacturers, have been unable to keep up with demand, thanks to supply chain problems overseas and in North America. Overseas, the issue is sourcing materials from Asia and Europe with COVID-19 lockdowns in mainland China and war in Ukraine.

Constraints are loosening, however. US trailer makers are fast filling available 2022 production slots, according to ACT Research, although backlogs stretch deep into December. Separately, FTR Transportation Intelligence puts pent-up demand for trailers at more than 100,000 units.

“This is an unprecedented situation and we’ve never seen these circumstances before,” Don Ake, vice president for commercial vehicles at FTR, told JOC.com Friday. “We’ve seen some improvement in deliveries since last year, but that improvement is going to flatten out” because of fresh disruption.

Ake said units shipped are down 4 percent from a pre-pandemic peak in 2018. But the price of trailers has soared 53 percent since April 2018, according to the US Bureau of Labor Statistics producer price index. S&P Global expects revenue from North America trailer sales to rise 25 percent this year.

Closely held order books

Trailer makers are closely controlling orders, Frank Maly, director of commercial vehicle transportation analysis and research at ACT, said in a statement Friday. “Their efforts border on order allocation,” he said, with larger fleet customers possibly getting a “better reception” than smaller ones.

US trailer maker Wabash National increased shipments of new trailers 21 percent year over year in the first quarter, to nearly 11,700 units, but still had a $2.3-billion order backlog. “We can’t keep stock trailers on the yard at dealers right now,” Brent Yeagy, CEO, said in an Apr. 27 earnings call.

Demand is not high just because retail sales are still growing, or industrial production rising; customers are expanding their use of trailer pools, Yeagy said. He sees shippers, brokers, and carriers ramping up trailer purchases. “Trailers are the critical link to make the business model work,” he said.

“There are structural changes in logistics across the board driven by the broader effect of e-commerce, creating friction and dysfunction from first to final mile,” he said. “Most people think about that just being at the final-mile end of the spectrum and they fail to realize how that goes upstream.”

That is driving trailer-to-tractor ratios higher across all sectors of trucking, Yeagy said. “Structural changes driven by e-commerce-related logistics disruption, the entry of new customers for trailers, and the emergence of larger trailer pools will drive extended positive demand over the next several years.”

ELDs force evolution

Jackson traces the emergence of those larger trailer pools back to the introduction of the electronic logging device (ELD) mandate in late 2017. The ELD gave trucking companies data they needed to accurately charge shippers for detention time when drivers were delayed at docks for hours.

“For years, the cost to haul a load 350 miles from Phoenix to Los Angeles was $360 plus fuel,” said Jackson. “It would cost you that to rent a trencher to put sprinklers in your back yard.” Carriers “couldn’t get everybody to pay us the detention the driver deserved. Now with ELDs, we can,” he said.

Two hours of excess detention time at $60 an hour would add $120 to that trip, he pointed out. “That’s a 34 percent rate increase.” he said. “Nobody’s going to pay that. This is an industry sensitive to a 1 to 2 percent rate increase.” Hence the demand for more drop-and-hook trailer pools by shippers.

Advances in logistics technology are assisting the growth of trailer pools. Many new trailers are equipped with telematics that make them easier to track. Trailer tracking is becoming more ubiquitous, but there are still many shippers and carriers using e-mail and spreadsheets, Vector’s Chu said.

“You really need a system that lets you know the real-time availability of a trailer,” said Chu. “As long as you have that visibility into where the trailer is, who has it, is it loaded, then you can allow any number of carriers to move that trailer in the trailer pool. Without technology you can’t do that.”

Vector worked with UPS and its subsidiary Coyote Logistics during the holiday season last year to digitally create a trailer pool for UPS. “Hopefully this will become the dominant way of moving freight and allow smaller companies, whether carriers or shippers, to participate in trailer pools,” said Chu.

For the truckload carrier or broker, trailer pools offer stable contractual business in a volatile industry. “In the 2019 trucking downcycle, spot rates dropped 50 percent and contract rates fell only 5 percent,” said Jackson. “That’s why we want trailer pools. They’ve proven more resilient in a cycle.”

By: William B Cassidy / JOC