Last Update January 14, 2021:
Stay informed about freight market conditions, supply and demand influencers, and other factors that can impact your supply chain.
The following information is built on market data from public sources and C.H. Robinson’s information advantage—based on our experience, data, and scale. Use these insights to stay informed, make decisions designed to mitigate your risk, and avoid disruptions to your supply chain.
In this edition of our monthly update, we cover both the spot and committed truckload markets; LTL, ocean, intermodal, cross border, and produce shipping information.
In the spirit of the new year, we offer a market perspective to open this month’s report to help our clients reflect on their 2020 North American surface transportation experience as well as look at 2021 expectations. The COVID-19 pandemic imposed an unprecedented influence on all businesses and markets, transportation is no exception. In short, the loss in trucking jobs in March and April was material. The return of the jobs lagged the economic recovery due to the economic stimulus, early retirements from an aging driver population seeking to avoid COVID exposure, easier screening for drug and alcohol infractions in the new national database, truck driving schools not returning to full capacity, and a growth in local driving opportunities. By the end of the year, most of the lost trucking jobs returned to local and specialty truck driving jobs rather than general long haul.1 The result continues to be a challenge to supply against demand growth.
The continued concern for 2021 is ease of access to capacity across the modal suite and cost escalation. We offer a few perspectives on truckload as a mode in hopes that these insights will help manage perspectives, influence strategies, and control transportation costs.
Truckload market demographics: The for-hire truckload market is commonly cited as a near perfect market. The reality of this market is that most of the carriers are small, with almost 99% having 50 trucks or fewer and comprising nearly 56% of the capacity. Only 204 carriers have fleets of 400 tractors or more, with 13 having 4,000 tractors or more.2 To complicate matters, the truckload market continues to fragment after 2019’s growth of small carriers, July-October saw ~31,000 more new carrier starts as well.3 Most shippers need to engage the breadth of the market capacity in an effort to support the varied attributes of its freight portfolio.
Freight attributes: Larger carriers search for lanes and loads that contribute to higher yield multi-leg routes, optimizing driver hours and leverage their trailer pool regions. Those are finite lanes with higher and more predictable demand patterns. The balance of freight and lanes are less attractive or less plannable. As such, capacity strategies are more response oriented and lean into the smaller carrier community which has limited elasticity and lacks trailer pools. Building these market capabilities into a strategy help ensure success and expected results.
Costing considerations: The spot market increase of 43% January to December 2020 was a factor of idle and shifting supply against a rapidly recovering freight demand.
Route guides produced capacity at higher than planned levels due to substitution and subsequent need to engage the spot market for immediate capacity. What can we expect from the smaller carrier community? Engaging this market majority is to seek available capacity and tied to the active spot trading market.
A rationalized portfolio approach is key to a top performing truckload strategy.4 Strategies to access the contractual and spot market capacity are crucial. Aligning business process and capacity communities with attributes of freight will yield the most predictable and higher performance results. Service providers can typically provide multiple services, helping the shipper community access the broad, evolving, and diverse capacity pool.We invite our clients to reflect on their freight portfolio and strategies to reach across not only the truck market, but rather the entire surface transportation modal portfolio. Please engage your C.H. Robinson team for a strategy conversation including our proprietary engagement, Procure IQTM. We work with our clients on strategies that bring forth the best that the entire capacity community has to offer as the market evolves and cycles.
2021 is already being discussed by analysts as a year of two halves. H1 is most likely a market of continued tension as idle supply returns to active duty and catches up to demand. H2 sees the analyst community offering a range of possible scenarios from slightly looser than balanced to continued tension. The dynamic nature of this period makes a forecast difficult, and to be more specific, where the economy and freight demand are going. Economists are closely watching these variables, and we encourage our clients to do the same as they develop their forecast for H2 2021: COVID vaccine roll out, impact of the second stimulus package and a potential third package, employment figures, and consumer sentiment. Active supply expected to grow, seating idle and new vehicles as carriers increase compensation packages to bring in drivers.
The specifics behind our opening comments include the following:
The trucking industry has experienced a headwind regarding potential hiring to fill new truck orders with a forecasted rise in retirement through 2025 and decline in 21-year-olds through 2023 (Figure 1). The market expects to see continued upward pressure on driver compensation and bonuses needed to seat the expanding fleet and counter the primary driver demographic trends. C.H. Robinson has also confirmed this through voice of carrier surveys and business review conversations. In addition to compensation strategies, our carriers report increased focus on shippers of choice, short haul lanes, dedicated fleet strategies, and recognition programs for drivers.
Consumer sentiment and behaviors:
Week 2’s regional representation of the U.S. spot market (Figure 2) continues to show a wide range of load to truck Ratios (“LTR”) in DAT’s data. There is continued tension in the Midwest, off the Southern California port region, and Laredo, TX. (LTR of 5:1 and higher is a very tight market.)
The spot market is a leading indicator of the broader and much larger contract/committed market. The broader contract market is more difficult to measure because those relationships are held in transportation management systems (“TMS”) and other datasets at the shipper and supplier level vs. more publicly available views from spot market trading platforms. What follows are some perspectives and notes on today’s environment from TMC, a division of C.H. Robinson.
We continue this month with route guide performance trends and insights to describe the broader contract market. Most of the shippers in this dataset use a traditional waterfall route guide. As such, we look broadly across industries and markets for common trends across this shipper community. Route guide performance is often measured by looking at a two key metrics. Route guide depth (“RGD”) is how deep into a route guide is needed for loads to be accepted, or the average number of tenders per load.
The other metric is first tender acceptance (“FTA”) or the percent of time the primary (intended) supplier accepts the shipment tender.
This month’s chart (Figure 3) reflects week over week change in RGD regionally. This is a lens to the contract market trends. A decrease in the sequential percent means there are fewer rejection of tenders to the primary supplier. RGD is the average number of tenders to cover a load. At 2.36 for the week of January 3rd, route guides are still struggling with the primary and secondary rejecting tenders somewhat frequently. Additionally, we see that the Midwest continues to be the most problematic market and correlated to the high load to truck ratios shown in figure 2 above. Finally, the 400-600 mile loads diverged again from other distance bands to a RGD of about 2.2 against the nationwide average of 1.82 for the week of January 3rd.
Please seek out your C.H. Robinson representative and our flatbed team, as we are seeing success with planned capacity and outsource programs.
New year, same LTL demand. Carriers saw solid volumes during Week 1 of 2021. Most indicated that volumes were good right out of the gate and will remain solid for the foreseeable future. Drivers to demand are ecommerce middle mile and the recovering manufacturing sector.
The increased demand in online shipping due to the COVID-19 pandemic coupled with normal upwards growth Y/Y stressed the U.S. parcel carriers like never before. This caused widespread disruption and delays in service to businesses and consumers alike, leaving parcel carriers needing to prioritize shipment types and shippers that increase yield and apply additional charges that sub-optimize cube, weight, and revenue.
Expect new rule and rates changes in 2021
What can shippers do to mitigate these changes? Two shipment types facing increased charges may have some mitigation strategies available, and C.H. Robinson may be able to our clients with these opportunities:
Capacity likely to remain constrained out of California throughout Q1, 2021 as container ships continue to arrive.
Full load summary
We invite our clients to engage your C.H. Robinson team regarding our research portfolio offering insights on applied strategies and attributes of freight correlated to performance in any market. Your C.H. Robinson team will discuss capacity strategies and business processes that will help bring increased operation and spend performance.
The Robinson Fresh division remains fully operational, and there are no impacts to supply chains to date.
We invite our clients to engage their C.H. Robinson or TMC commercial representative to discuss collaborative strategies designed to offer quick and effective response. Our modal expertise and capacity portfolio afford for elasticity in full and partial load shipments to help minimize service disruptions in this unique market.
If you have any questions, please do not hesitate to contact your C.H. Robinson or TMC commercial representative for further information or look up any of the services listed within this report at www.chrobinson.com.