Trucking market disruption factors: the state of the industry (Part 1)

Jason VanoverFreight Market Blog

Let’s hit pause for a moment. Stop all the chaos of freight management, and take a moment to think about the trucking market’s consistency. Yes, it has asked the industry for more in recent months, but what about before the pandemic? What happened to the typical expectations for rising versus falling? Those standards remain and are inevitable. Change is the only immortal aspect of freight management, and it’s time to assess the state of trucking market disruption. 

Why? Well, there are plenty of issues coming to the forefront today. Political instability, Brexit, pent-up consumer demand, spot versus contract considerations, and more complicate freight managers’ duties and add more transportation data to the industry. And to that end, this two-part series will delve into a few of these disruptive influences and what shippers and trucking companies can do about them.

Death to contracts and spot market assumptions; long live strategic positioning

Figuring out whether to post loads to the spot market or take advantage of contracted freight sounds great on paper. The problem is that the idea rarely becomes a reality in the fast-paced trucking market. Spot rates still reflect that all freight is bought and paid for on the spot, meaning even those with the best-contracted freight rates available are at the mercy of spot influences. 

The key to avoiding delays and ensuring ample capacity lies in foresight; looking to market indicators and signals that allude to a coming shift in market dynamics. For instance, trucking orders recently increased as a result of pent-up working capital across trucking companies. And as explained by Zach Strickland of FreightWaves, that’s the natural progression of all truckers. Everyone wants to be an owner-operator, but the real value lies in becoming more strategic. Even in the best of times, the next lull is around the corner. And the only way to maintain profitability is to understand the industry’s state and do something about it. That’s where seeing the signals, such as Freight KPIs, within individual lanes, looking at both granular and holistic views, can add the most value.

It all goes back to creating a more strategic approach to viewing available loads, moving owner-operator assets, and knowing when accepting offered freight from a shipper is the right thing to do. And the crux of the whole process rests on the timeliness and validity of any data-driven insights available. That’s where a resource like FreightWaves SONAR can help, providing insight into all industry conditions, identifying the correlations within freight data and avoiding unnecessary losses through logistics automation where possible.

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Brexit and politics embroil the mix

Few activities are more complex than global supply chains. And Brexit plays a role as well. According to Bloomberg, “‘Driver shortages over the holiday season are normal and usually lift spot rates,’ said Stephan Sieber, chief executive officer of Transporeon. But ‘the magnitude of the deviations we saw at the back end of 2020 was not normal.’” While it can seem far-fetched to imagine impacts on the U.S. trucking industry from Brexit, it’s crucial to think about what it means. Any change in international trade will inevitably result in implications in the U.S. trucking market. The U.S. freight market sets the global standard, but the standard can have a reverse flow every once in a while. 

In other words, changes within Britain, which has remained a primary consumer of U.S. exports, will trickle down into U.S. changes. Additional effects may derive from differences in how other countries position their supplies and capacity to lower operations costs. Even ocean liners from China to the U.S. West Coast could see an effect if the market swings violently overseas. Britain barely avoided a calamity by passing an 11th-hour trade agreement, but even still, the need to be ready for a future change in global trade law is absolute.

The topic of trade laws doesn’t end solely with Brexit. It continues. Market fluctuations have always been subject to political change and vice versa. Political instability in the U.S. could result in entirely new legislation to benefit (or harm) the trucking market. Other changes could result in environmental consequences. Regardless of party or affiliation, trucking companies need to play the long game. They must be mindful of how any change could result in adverse effects when politics flip. And that’s a useful insight to have, especially as companies look toward higher demand and tighter capacity through much of the first quarter of 2021. 

The next stimulus will play a role too

Another factor affecting the state of the industry is the next coronavirus relief bill. As the new Congress convenes and takes up the many issues on the table, a new stimulus could bring new life and spending money to the industry. Why? Well, political insiders have hinted at a massive rollout of the COVID-19 vaccine in the early days of the Biden administration. And even last week, Craig Fuller, CEO of FreightWaves, noted how Biden “should appoint a final mile logistics coordinator whose sole job will be to handle the last mile of vaccine distribution.” With that in mind, reefer rates could become another factor that’s usually not that problematic during the coldest months of the year. And again, it will play on the need to find and accept loads based on profitability and attractiveness, using predictive and prescriptive analytics to see the best moves.

Navigate trucking market uncertainty with a benchmarking-capable and actionable freight data engine

The best-laid plans are always changing  always moving to reflect the latest trends in the industry. In freight management, freight forecasting of the trucking market is the best way to isolate the risks and find a better, more profitable future. And that’s even more important in an industry where minor disruptions can have a lasting impact. In part two of this series, we will dig deeper into how a COVID-19 vaccine distribution presents new challenges, what to expect of the unprecedented demand of e-commerce, and when the world will finally enjoy some return of normalcy. That will also be integral in all decision-making when it comes to dining, taking advantage of available services like luxury travel, and becoming more comfortable in and outside our homes. In the interim, request a FreightWaves SONAR demo by clicking the link below.