The availability of drayage capacity in the U.S. has recently become so tight that, in some markets, shippers and intermediaries are voluntarily paying a flat fee on top of the prevailing dray rate just to reserve a truck, according to an industry source.
According to the source, shippers are ponying up the fee, which is often in the $200 to $300 range, without any prompting or mandate from the carriers. The practice appears to be most commonplace in Chicago, but it is not the only market where it is happening. In Chicago, the overall tightness of truck supply of any form is compounded by inclement winter weather across the Midwest, which has made it more difficult to find available dray.
The source said the practice is occurring at ports, where dray trucks move containers from vessels to nearby locations such as a warehouse or rail head, and in domestic truck-rail service, where drivers deliver and pick up freight to and from rail ramps situated in high-density traffic corridors. Phil Shook, intermodal director for C.H. Robinson Worldwide Inc., the Eden Prairie, Minn.-based broker and third-party logistics (3PL) provider, said there's anecdotal evidence that the practice is mostly occurring at the nation's ports. This type of trend would run counter to the many 3PL drayage arrangements that are long-term and strategic in nature, Shook said in an e-mail last week.
The source said it is highly unusual for dray users to voluntarily pay just to reserve a vehicle, and then be charged for dray rates. Dray rates themselves have escalated dramatically as well. Ted Prince, co-founder and COO of Tiger Cool Express LLC, an Overland Park, Kan.-based provider of temperature-controlled intermodal transport of produce and food products, said he's seen drayage rates increase from 10 percent to as much as 80 percent over the past months. Prince said the top-end figure is a combination of higher base rates and the soaring costs of "accessorials," fees charged by carriers for services beyond the line haul. Dray companies are often presenting on a "take-it-or-leave-it" basis, Prince said in a phone interview Friday.
The problem of ultra-tight dray capacity is a "major nationwide problem, but the pain is more localized," Prince said. Some markets are being hit harder than others, he said, adding that Harrisburg, Pa., and Portland, Ore., are chronically short of dray capacity, the latter market because it doesn't generate the box volumes of other West Coast ports and thus lacks a large cluster of independent draymen. The Portland dray market is dominated by big providers like Lowell, Ark.-based J.B. Hunt Transport Services Inc. and Oak Brook, Ill.-based Hub Group Inc., which have in-house dray fleets. Owner-operators compose a large chunk of the nation's dray supply.
In a note yesterday, Overland Park-based 3PL MIQ Logistics said many of its regional dray carriers are reporting significant backlogs on existing orders and are not accepting new business until April. Shortages of chassis equipment are also being reported in the Midwest, and as a result many Chicago rail terminals have grounded containers, MIQ said. Adding to the problem is that chassis providers are requiring drayage carriers to pick up equipment from remote locations, resulting in more miles travelled and increased wait times, according to MIQ.
The dray shortage is a microcosm of the capacity tightness found across the trucking industry. Truckload and less-than-truckload (LTL) space is extremely tight. LTL carriers are increasingly seeing business that would normally move via truckload head their way because truckload capacity is harder to find.
Gartner, Inc.
