Market Update: Transportation Industry News
In the transportation industry, there are many moving parts that can impact your day-to-day operations. From monitoring carrier capacity and driver shortages to tracking diesel pricing and government regulations, staying current on events in transportation means you will be better equipped to make knowledgeable business decisions and drive growth and efficiency into your supply chain. This month’s Market Update highlights key factors that impact the transportation industry in North America and will keep you up to speed on the latest news and topics that matter to your supply chain and business.
Large Scale Market Indicators
There are four reasons for the current capacity crisis, as highlighted in the FTR Trucking Update:
1. The sustained tightness has enabled the carriers to increasingly focus on their good freight.
2. The price differential between hard and easy freight has increased.
3. Carrier-shipper relationships are becoming more important under the pressure of increasing rates.
4. Tight conditions have made drivers much more sensitive to their treatment by shippers (dock delays, loading requirements, and personal treatment).
Truck registrations are growing. IHS Automotive reported that registrations of new class 8 trucks climbed 16.7%—for a six month total of 107,158—in the first half of 2014 from a year earlier, as strong freight demand and tight capacity spurred large fleets to boost equipment purchases.
The Council of Supply Chain Management Professionals (CSCMP) 2014 Annual Global Conference took place September 21–24. It covered many supply chain topics, but capacity was a common theme throughout a number of the formal and informal discussions amongst shippers, third party logistics providers (3PLs), trucking executives, and analysts.
Shipping costs are expected to increase as freight carriers seek higher rates. Shippers can expect to pay more to secure freight-hauling capacity as truck and rail carriers raise rates to cover rising costs and to fund investments in equipment and infrastructure.
While the challenge of finding and retaining good truck drivers is nothing new to truckload carriers, the driver shortage is now impacting less than truckload (LTL) and intermodal operations, according to Wall Street analysts.
Driver demand remains very tight with no appreciable surge capacity. This makes the market vulnerable to seasonal freight surges and any upside freight growth. The market is full of recently announced increases in driver pay from asset providers.
A rule proposal from the Federal Motor Carrier Safety Administration (FMCSA) to increase the minimum amount of liability insurance carriers must have (which is currently $750,000) has been sent to the White House’s Office of Management and Budget (OMB). The Department of Transportation (DOT) projects the rule to clear the OMB October 12, it will have a 60-day comment period ending December 12.
According to the Department of Energy Information Administration (EIA), the average price for diesel per gallon is $3.75. Diesel prices have been down for 25 of the last 28 weeks.
Which transportation indicators or topics are most relevant to your interests? Leave your suggestions in the comment section.