Analyst Insight: After two years of pandemic-driven high rates and extreme demand, the trucking market is undergoing a reset, as a sense of “normalcy” returns to the market. However, “normalcy” will likely bring higher costs for updated trucks, equipment, parts, and components, fuel, insurance, and wages. To help offset higher operational costs, trucking firms embracing technology platforms will win more freight from customers being able price their freight more quickly.
The post-pandemic trucking market is slowing as customer demand slows. Expectations are that trucking demand will be flat to negative through at least the first quarter of 2023, and will only begin to significantly pick up when customers look to replenish inventories, and manufacturing activity improves.
“We have revised our economic forecasts and are now modeling a recession in the first half of 2023, although flat (0.0%) for 2023,” said Kenny Vieth, president and senior analyst, ACT Research, a market research firm focused on the commercial vehicle and transportation markets.
Sustaining high costs will be difficult for many carriers and result in some leaving the market by choice or bankruptcy, while others will be acquisition targets. According to some estimates, nearly 3,000 truck drivers have lost their jobs this year as trucking companies large and small declare bankruptcy. However, the American Trucking Associations’ Chief Economist Bob Costello estimates the current driver shortage has risen to 80,000 — an all-time high for the industry. The wide discrepancy is due to the fragmented trucking market.
Roughly 90% of truckloads moving on the road today are contract freight. Compare that to a year ago when it was 75% contract, 25% spot, according to DAT Freight & Analytics data. The difference is due to higher fuel prices this year.
Furthermore, DAT noted that most carriers rebidding their contracts with large shippers are asking for more volume. But, while they may win more volume, contracts are coming in about 12% lower than last year.
“The difference this time around, he said, is that last year’s lack of capacity burned shippers. Now, shippers are sending out their bids to a more select group of carriers that played nicely with them last year,” principal market analyst for DAT Freight & Analytics, Dean Croke, said during the Women In Trucking’s 2022 Accelerate Conference & Expo.
Indeed, shippers are now in a position to push for better rates. If shippers are still holding on to contracts six months or older, now is the time to capture lower prices. But shippers must be mindful that they’re working with a trusted partner.
Because of continued fluctuations and uncertainty in supply chains, working with a trusted partner that offers end-to-end solutions, including truckload (TL) and less-than-truckload (LTL), drayage, and specialized transportation services such as vans and sprinters, will be the best solution for shippers.
Managing such solutions via online platforms will benefit shippers and carriers by providing quicker rate quotes, faster deliveries, and timelier payments to carriers.
Outlook: Embracing online platforms will likely increase in 2023, as shippers and carriers become more cost-conscious in an uncertain economy. In addition, online platforms will help shippers focus more on their core competencies while offsetting higher operational costs for carriers.
However, as the number of online platforms grows, those backed by knowledgeable analysts will be the winners, because the trucking market remains a business in which strong relationships and trust are essential.
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