A new study commissioned by Freightos has revealed significant inefficiencies within the logistics sector, indicating that a substantial portion of contracted freight capacity remains unused across the industry.
The research specifically found that truckload shippers fail to utilize 70% of the contracted capacity they negotiate. This reliance on contractual agreements is identified as a key factor contributing to underutilized capacity across both truckload and ocean shipping operations, highlighting a widespread challenge.
The Extent of Underutilization
The study’s findings paint a clear picture of substantial waste within freight logistics. For truckload operations, the 70% non-utilization rate of negotiated capacity represents a considerable economic and operational inefficiency. This means a vast amount of pre-arranged shipping space goes empty or partially filled, despite being paid for or reserved.
This issue extends beyond just road transport. Researchers also identified similar patterns of underutilization in ocean shipping. The pervasive reliance on fixed contracts, while offering perceived stability, often results in a mismatch between committed capacity and actual shipping needs.
A new study reveals significant logistics inefficiencies, with 70% of contracted truckload capacity going unused, a problem also prevalent in ocean shipping. This widespread underutilization, largely due to reliance on fixed contracts, creates substantial waste and costs, prompting a need for more flexible capacity management strategies across the industry.
Impact on Shippers and Carriers
Such high levels of unused capacity carry significant implications for both shippers and carriers. Shippers may incur costs for capacity they do not fully use, impacting their bottom line and potentially leading to higher overall logistics expenses. This inefficiency can also hinder their ability to adapt quickly to fluctuating market demands.
For carriers, underutilized assets represent lost revenue opportunities and increased operational costs per unit carried. Empty trucks or partially loaded vessels are less profitable, leading to reduced efficiency across their networks. The study suggests a need for a re-evaluation of current contracting practices to optimize resource allocation.
Rethinking Contractual Strategies
The findings prompt industry stakeholders to reconsider traditional approaches to freight capacity management. Moving forward, companies might explore more flexible contracting models or enhanced forecasting techniques. Better alignment between contracted capacity and actual shipping volumes could unlock significant efficiencies and cost savings for all parties involved.
Addressing this widespread underutilization could lead to a more agile and sustainable logistics ecosystem. Optimizing capacity use stands as a critical challenge and opportunity for the global freight industry.