Record Demand Seems to Be Easing. What Does It Mean? Understanding the Trucking Marketplace Today
Understanding the realities of today’s trucking marketplace means relying on timely data from high-quality sources, combined with an awareness of global circumstances and day-to-day insights from carriers, shippers, and brokers on the ground.
So many factors have influenced the transportation industry over the past few years—from COVID-19 “closing” the world, to hyper spending, to supply shortages, to interest rate and fuel price hikes, to political stress with China, and Putin’s war in Ukraine.
At Tucker, we keep the pulse of the market by consulting a few key sources and synthesizing the information we receive from several channels.
The Morgan Stanley Truckload Freight Index gives us the macro view of trucking. Their data shows that the beginning of 2022 brought an all-time high demand versus supply for dry van trucking.
Summer of 2022 feels a bit more balanced, where the pandemic squeeze may be starting to ease. But it is important to keep in mind that even so, relative demand remains the second or third highest ever.
Fuel prices are also making a tremendous impact on the market. Truckstop.com’s Market Demand Index for summer of 2022 shows truckload spot rates nearly keeping pace with those in 2021 due to soaring fuel costs, despite declining demand.
Carrier (and driver) numbers continue to explode, as reported by QualifiedCarriers.com and FMCSA (Federal Motor Carrier Safety Administration), showing the industry continues to expand, with small fleets (1-100 trucks) representing 70% of all drivers in the United States.
The largest fleets have grown, but not at the pace of the smaller fleets. Since 2020, 117,000+ for-hire fleets were added to the nation’s total.
But small fleets face headwinds. On June 30, the U.S. Supreme Court cleared the way for California’s AB5 to take effect. California’s AB5 is the state’s attempt to unionize much of the trucking industry serving California and its ports. This will harm many thousands of small business owner-operators who serve California and raise rates.
Freight buying strategy must consider that capacity crises are arising frequently (with 3 in the past 7 years). Entirely asset-based models fail during every uptick. Build your resilient supply chain today, to mitigate the next capacity crisis, by balancing between carrier and broker awards. Now is the time for zeroing in on on-time performance.
Measure and reward on-time performance and do not bid your whole network. Shoring up poorly performing lanes and deepening your provider relationships will help you perfect your on-time performance.
Quality metrics still have enormous room for improvement, industrywide.
A thorough understanding of today’s marketplace and the many factors that influence it can position you to make the right decisions for your business and your clientele.
Jeff Tucker is CEO of Tucker Company Worldwide, the oldest privately held freight broker in the United States. www.tuckerco.com