Our industry’s cyclical pattern of tension and slack has become familiar to many of us. To understand whether demand for truckload capacity will be up or down in the coming year, it’s critical to watch the economy. With slower economic growth forecasted for 2019, we could expect a more historically normal level of truckload market balance than we had last year.
In addition to economic growth, there are a variety of factors that will influence the truckload shipping market. Below are the top five trends I expect to be big factors this year.
Carriers accepting freight strategically
Recent earnings releases for public truckload and less than truckload (LTL) carriers show something rather interesting. Many of them cite increased yield. Even as the market softens from last year, carriers continue to strategically accept the freight that allows them to have more revenue generating miles and hours because this leads to more loads per truck (essentially creating capacity), greater pay for drivers (if they’re paid per mile), and ultimately a higher profit.
Truckload fleets are growing
While it’s hard to discern exactly how much more capacity is available today, various reports all support the idea that both trucking jobs and truck sales—for both replacement and incremental growth—have increased.
The level of orders for new truckload trailers has been strong. Even better news is that these trailers are not going to private or dedicated fleets. They’re entering the general market.
Carriers with trailer pools are also striving to get more loads per tractor, which in turn increases available capacity. By increasing the ratio of trailers to tractors, they’re able to achieve this goal. Of course, these types of initiatives require shippers and consignees that have little dwell time and keep trailers moving. Keeping drivers and trailers moving is pivotally important to this process.
Truckload labor is up too
The Bureau of Labor Statistics, show 38,500 more trucking jobs in the past three years—and that does not count owner/operators or the smallest carriers. And by looking at new FMCSA registration data, we see it’s the smallest carriers that have grown the most.
One contributor to this change is increased driver wages. It seems we have found the necessary compensation to entice people from other industries into trucking.
Labor in our industry still has longer-term challenges—like addressing the baby boomer retirement bubble and the lack of female drivers. We will need to continue to watch several factors, like the shared labor pool with manufacturing, oil and gas extraction, housing, immigration policy, and wage increases to truly understand if the labor increase will stick.
Average length of haul is declining due to ecommerce
A recent article on Heavy Duty Trucking featured some interesting information from The American Transportation Research Institute. The research shows a declining length of haul, which is generally attributed to the rise in ecommerce and the omni-channel model, as many companies try to move closer to customers.
As businesses continue to evolve the structure of their supply chains to be closer to consumption, shorter length of haul leads to faster replenishment. From there, we see trucks at docks more often and additional dwell time, which puts pressure on efficiency and revenue that carriers are continually working to manage.
Companies creating new strategies to handle market changes
How a company handles the ongoing changes typical of our industry can influence that company’s success. Rather than reacting to changes that happen, the best companies develop strategies that provide the best possible outcome for any market cycle. Dedication to a strategy can contribute to differentiating a company’s supply chain performance and customer experience.
At C.H. Robinson, we believe that a consistent approach to supply chain excellence through carrier management, supply chain technology, internal collaboration, and balance of price and service is a positive way to be prepared for when the market changes again. We understand your specific business needs and have people you can trust to help translate those needs into solutions.
I look forward to seeing what the year has in store for us. As always, the ability to adapt using a mix of modes to optimize business will help prepare any company, no matter the outcome of some of these trends and changes.
Steve Raetz, Dir. Research and Market Intelligence, joined C.H. Robinson in 1989 and currently focuses on areas contributing to the evolution of C.H. Robinson’s supply chain value proposition to its clients, supporting client sales and relationship strategies through transportation market insights and academic research. Previously he led CHR’s consulting team, was General Manager of Minneapolis National Accounts and served as the Southeast Regional Transportation Manager for the Quaker Oats Co. Steve also is a member of advisory boards with three universities supply chain programs.
better news is that these trailers are not heading to private or dedicated fleets. They’re entering the overall market.