8 Truckload Market Trends for 2018

What is normal for the truckload industry? That may seem like a difficult question considering how rapidly things change in our industry—especially in the last calendar year. But there are several trends presenting themselves that will help us redefine what “normal” means for truckload in 2018 and 2019.

Below, we explore 8 trends that will have an effect on the truckload market in 2018.

1. Efficiently utilizing capacity
Since around 2011, when the recession started to improve, we’ve gotten used to seeing extremely efficient use of for-hire capacity. According to FTR Transportation Intelligence, it’s been common to see truckload utilization over 95%. It appears this trend of hyper-efficiency will continue.

Keep in mind that this level of efficiency leaves little elasticity in the market. When securing transportation, you’d do best to align your favorable freight attributes with carrier goals.

2. New trucks entering the market
In 2018, FTR Transportation Intelligence expects 60,000 more trucks will enter the market than are needed to replace retiring trucks. What’s not clear is if these strong truck sales forecasts will add capacity or primarily serve as replacement capacity. Incentives for carriers to purchase new trucks include better fuel economy, lower maintenance costs, higher reliability, and improved driver recruitment and retention.

While larger and medium sized carriers most commonly purchase new equipment, they may not be able to hire a new driver for each new truck, limiting the actual incremental growth to the fleet. Smaller carriers purchasing used trucks may be able to recruit friends and family members to join the business during these strong economic times.

3. Labor availability influences capacity
While actual equipment forecasts are strong, driver availability will continue to pose a significant challenge for the trucking industry. Added trucks cannot help capacity shortages if carriers must leave vehicles parked without anyone to drive them.

We will need to watch several factors to best understand labor in trucking, including the shared labor pool with manufacturing, oil and gas extraction, housing, immigration policy, the aging workforce, and wage increases.

4. Growing demand adds pressure
GDP and manufacturing indices continue to show strength in the economy. Should these levels of production continue, demand for more transportation will continue to place pressure on a fleet struggling to grow.

5. Ecommerce influences freight flow patterns and efficiency
The growing popularity of ecommerce is changing historical optimized freight flows of full trucks from manufacturing through a distribution center network to retail stores. Online orders are now shipped from manufacturing, upstream fulfillment centers, and retail stores. Often these shipments mean higher cube for the same goods, resulting in more overall market capacity being used.

6. Fuel continues its upward pricing climb
According to the Energy Information Administration, Benchmark North Sea Brent crude oil spot prices averaged $64 per barrel in December 2017, the highest monthly average since November 2014. Compared to a year ago, today’s fuel prices are 45% higher. Keep in mind that there is a difference between fuel pricing and market transportation pricing, yet it’s important to account for fuel fluctuations in your overall transportation budget, even if fuel prices are worked into the fuel surcharge or absorbed in part by carriers.

7. Tax reform may influence both supply and demand
New tax rules offer 100% depreciation for equipment in one year. It is a reasonable presumption that this change will incent manufacturers to invest and carriers to purchase more trucks, thereby injecting additional demand on today’s under supplied market.

8. ELD mandates influence is still unchartered
Finally, but certainly not least, the electronic logging device (ELD) mandate. The mandate to track hours of service (HOS) through an electronic device rather than a paper log book may shift driver behaviors regarding HOS. Following hours of service more closely may pull capacity hours for freight transport out of the market. As the mandate just launched in December 2017 and won’t be enforced until April 1, 2018, how significant this effect will be is still unknown.

How to navigate the new normal
One thing that remains constant through all of these factors is how they influence available capacity. No matter what the outcome of some of these trends and changes, capacity is still at the top of everyone’s mind. Here are a few areas to consider focusing on to help you succeed in these new market conditions:

• Consider the age of your pricing. Research shows that rates less than 12 months old and renewed on an annual cadence perform best.

• Benchmark. Review your current pricing position against a market benchmark, not only your internal numbers.

• Add predictability whenever possible. Eliminate ebbs and flows as much as possible. Predictable freight is easier to align with carrier optimization models.

• Consider your region. Depending on your shipping and delivery locations, these trends may influence your business more or less than in other regions.

• Shorten loading and unloading time. Make freight more attractive by cutting dwell time as much as possible.

• Remember, lead times matter. Adding as little as 24 hours of lead time can have a big impact on acceptance rates.

If you need help implementing any of these or other supply chain changes, connect with an expert from C.H. Robinson today to get started.

Steve Raetz
Director, Research & Market Intelligence
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