Trucking is Sure Confusing These Days

Trucking is sure confusing these days isn’t it? Chew on these facts for a minute:

1.      The trucking industry is officially in a recession, according to data tracked by ACT Research and reported by FreightWaves.

2.      Freight volume in 2019 has been strong, but has now started to weaken below 2016-1017 numbers. Spot rates are down double digits and contract rates are being converted to spot rates by shippers faster than you can imagine.

3.      Is there a driver shortage as we have been told our whole careers? U.S. unemployment is at 3.7%. A record number of Class 8 trucks were sold in 2018 and so far in 2019, the number of cancellations is below average. So, I guess this means there is no driver shortage?

4.      I sent this question out to several of my contacts this morning, “There have been several carriers that have gone out of business in the news in the past couple weeks. Curious as to your thoughts? Over expansion on the carrier communities part causing unrealistic rate softness or what exactly?” Whether you agree or disagree, many publicly traded shippers missed their numbers last year due to transportation costs. Knowing that the trucking economy is in recession and that there are too many trucks for even a robust U.S. economy means that shippers are going to keep the pressure on to lower rates so that they do not have to raise prices to their customers.

5.      Tariffs, weather, and other things have impacted the transportation economy negatively this year.

6.      The most recent Cass Freight Index (June 2019) indicates that, “As volumes of chemical shipments have lost momentum, our concerns of the global slowdown spreading to the U.S., and the trade dispute reaching a ‘point of no return’ from an economic perspective, grow.”

Like I said, it sure is confusing!

So, freight brokerage, how do you handle these facts?

From my perspective:

1.      Stay the course with your marketing and contacting of your prospective customers. Continue to do things that show them your knowledge and passion for the industry while understanding that they have an ample supply of trucks at their disposal. Make sure you have a growth strategy for acquiring customers. There are a lot of shippers who move smaller volumes that are not attractive to larger fleets. Find them.

2.      Cover your customers freight and maintain an unblemished track record of doing so. In an industry that has a reputation of being unreliable, be the shining star of reliability.

3.      Do not cut corners when you are vetting carriers because you are trying to find someone ‘cheaper’. Bad idea. Really bad.

4.      Goldman Sachs reported earlier this year that 23% of all loads moved in the U.S. were handled by freight brokerages and 3PL’s. With most of those smaller fleets looking to the spot market rather than contractual freight, “shipper behavior” is changing to tap into those smaller fleets on a more regular basis. Instead of using them for surge capacity, more consistent use of those fleets is smoothing out volatile spot freight rates. Freight brokerages live in this environment.

Keep working!

-Russ

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