Understanding What’s Behind the High Demand for Flatbed Shipping

High demand for flatbed shipping is rolling mightily into the peak periods of summer, continuing to drive historic supply issues across North America.

While it’s difficult to predict how long it will last, what is predictable is that unprecedented demand of flatbed shipping will disrupt the typical cycles and seasonal trends we’ve come to expect, and make securing supply even more difficult as the market and carrier demographics remain fragmented.

Understanding what’s behind the demand surge provides perspective on things you can do to meet the challenge. Here are three factors contributing to the current situation:

Regulatory Changes—specifically ELDs

Flatbed carriers and drivers are feeling great impact from the Electronic Logging device (ELD) mandate for a variety of reasons.

• Freight is often project-based with seasonal demand.This means carriers have limited opportunities to build a “freight network” or plan routes that optimize drive time.
• Flatbed carrier demographics. Typically, carriers operate between 1-20 trucks and have 1:1 tractor-to-trailer ratios. This limits their ability to implement efficiency tactics such as drop trailer pools, driver relays, and slip seating.
• Pickup and delivery locations. Job sites, ports, mills, and other unique places often result in longer dwell times for drivers.
• Securing and protecting cargo.Securing and protecting a multitude of commodities that ship on open deck trailers is labor intensive, resulting in decreased drive time and yield to the truck.

Ongoing and future legislation changes

The current administration has proposed and passed legislation that will drastically impact flatbed shipping demand now and into the future, including:

• Tax reform. In lieu of applying cash to the balance sheet, many corporations are making capital expenditures, which increase flatbed demand for hauling products for plant modernizations, Greenfield projects, machinery upgrades, and more.
• Energy sector support. The administration is opening avenues for offshore oil drilling in many coastal regions across the U.S. This, coupled with the emergence of liquefied natural gas export activity and ongoing tax breaks for renewable wind energy, means that demand for flatbed will remain high in the energy sector.
• $1.8 Billion Infrastructure Bill. This bill is not passed or funded yet, but improvements to our nation’s roads and bridges is a known need—one that would directly lead to more demand for flatbed equipment.
• Steel/aluminum import tariff.Effective March 23, 2018, this tariff’s full implications remain to be seen. It’s likely we’ll see a disruption in capacity networks as less import activity and more inland steel production may drive higher demand and shift capacity away from ports.

Economic and industry influencers

Positive economic trends within specific industry sectors heavily influence the demand for flatbed shipping.

• Oil and gas sector. With the price of oil improving (crude oil is north of $60/barrel), onshore and offshore drilling activity picking up, and more efficient operations, many are comparing today’s activity with what we saw in 2014 (when crude was $100+/barrel).
• Industrial/agriculture machines.Tax reform will also influence commercial/industrial machine production as CAPEX is allocated to equipment upgrades. In addition, while commodity prices remain weak, growth in global population and aging equipment fleets are resulting in increased agriculture machine sales activity.
• Manufacturing and automotive industry. Manufacturing continues to see positive trends contributing to GDP >3%. This will result in additional demand for many commodities hauled via flatbed.
• Housing and Construction. The housing market continues to remain strong and the recovery efforts from last year’s catastrophic natural disasters are ramping up as insurance settlements are finalized. This will result in strong demand for building materials hauled via flatbed.

While the situation presents challenges for both shippers and carriers, it also presents opportunities to:

• Evaluate and use your TMS: To review supplier score carding, route guide performance, vendor score carding, and KPI measures, and identify gaps where risk of supplier chain failure is imminent and course correct where applicable.
• Leverage your buying power: Reevaluate decentralized transportation decision control vs. centralized. Is there room to improve forecasting, planning, and transportation purchasing across your holistic network of freight?
• Align expectations of vendors/suppliers: Are they attractive shippers? How many other companies are purchasing from them and how is that freight procured? How can you make your freight stand out? Have they made changes to shipping that negatively impact your ability to secure capacity?
• Define procurement strategy: Work with capacity providers to determine price, service, and commitment expectations of the business. Understand where risk of capacity failure exists, align process to mitigate soft costs and ensure accountability to execution. Diversify carrier strategy and define carrier loyalty where applicable.

The good news about high demand for flatbed shipping is the economy is robust, and both shippers and carriers can benefit. Your ability to understand and navigate the new shipping environment is critical to your success during this period and into the future.

As the Director of North American Flatbed, Adam leads C.H. Robinson’s flatbed service line strategy and initiatives across North America. He focuses on helping C.H. Robinson act as an industry leader in the flatbed space working across several industry sectors and a fragmented carrier community to create integrated and customized flatbed solutions. Adam is passionate about the carrier community as he grew up in transportation working for his family’s asset based LTL and flatbed trucking company and attained his CDL at age 19. Adam graduated from St. Cloud State University with a degree in business finance.