The freight market is strong and shows no signs of weakening.
The American Trucking Associations reported that after a 1.9-percent decline in September, the seasonally adjusted For-Hire Truck Tonnage Index rose 3.3 percent in October and was up 9.9 percent compared to October 2016.
“Continued improvement in truck tonnage reflects a much stronger freight market,” said ATA Chief Economist Bob Costello in a press release. “This strength is the result of several factors, including consumption, factory output, construction and improved inventory levels throughout the supply chain. Additionally, the 6.7% rise in tonnage over the last four months suggests to me that retailers are expecting a good holiday spending season.”
The fast-changing world of trucking means that logistics officers, pricing managers, operations managers, traffic managers and C-level execs in the trucking industry have a lot of data to process. Myriad factors combine to affect lane pricing, market pressures and asset utilization—all of which should be top of mind this holiday season.
Holiday Shipping Expected to Rise by 5 Percent
A good holiday season is also what UPS, the nation’s largest package carrier, is calling for. UPS announced in October that it plans to deliver more than 750 million packages globally between Thanksgiving and New Year’s Eve.
“The record-breaking seasonal global delivery volume is approximately 5 percent above last year’s holiday peak shipping season volume,” the company said. “Of the 21 holiday delivery days before December 25, 17 are expected to exceed 30 million delivered packages.”
UPS based its projections in part on retail industry sales forecasts. The National Retail Federation in October estimated that holiday sales would increase between 3.6 percent and 4 percent this year.
“Our forecast reflects the very realistic steady momentum of the economy and overall strength of the industry,” National Retail Federation President and CEO Matthew Shay said in a press release. “Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season.”
Transportation Topics suggested that while October is a typical high point for shipping annually, this year was boosted by rebuilding efforts following this year’s hurricanes.
Rates Are Up and a Driver Shortfall Will Likely Expand
Increased shipping has been accompanied by overall higher transportation prices, DAT noted. Current industry stats include:
- Spot rates for dry van freight, including fuel, were $2.02 a mile in October, an increase of 37 cents compared to October 2016.
- The average rate for refrigerated freight was $2.31 per mile, the highest since December 2014.
- Rates for flatbed freight were $2.33 per mile in October, a 41-cent increase from October 2016.
The surge in trucking comes amid an industry-wide driver shortage that is not expected to improve. The American Trucking Associations said that the shortfall surpassed 50,000 positions in 2016 and, if trends continue, could top 174,000 by 2024.
“If the trend stays on course, there will likely be severe supply chain disruptions resulting in significant shipping delays, higher inventory carrying costs, and perhaps shortages at stores,” the association said. “Because trucks account for 68.8% of all tonnage moved in the U.S., it is highly unlikely that the driver shortage could be reduced in any significant manner through modal shift (i.e., shifting a large amount of freight from the highway to the rails or another mode).”
LTX Solutions noted that truckers in America are aging (average age of 55), and younger drivers are not stepping up to take their places. LTX offered some ways to address the trucker shortage:
- Increase driver pay
- Decrease time on the road
- Lower the regulated driving age
- Target minorities, women and veterans
- Support autonomous trucking
- Utilize Less-than-Truckload shipping
Approach 2018 With Confidence
Rates will likely continue to rise as demand stays high and driver numbers continue to sag. Drivers and trucking companies also have to contend with the new electronic logging device (ELD) rule. Supply chain management expert Dave Malenfant covers these issues and more in his conference for AudioSolutionz, Estimate and Manage Truckload Pricing in 2018. Malenfant covers market pressures to move on to spot segments, the driver shortage impact, how the intermodal market is impacting truckload pricing, and the move to “control towers” for lane pricing and the impact on contract segmentation.
