Top 15 Ways to Maneuver in Today’s Trucking Market
Buying trucking services can feel like running an obstacle course — constantly negotiating rates or avoiding capacity hurdles. As 2023 approaches, it’s time for shippers to train for the next challenge.
Historic inflation, elevated fuel prices, and ballooning operating costs—welcome to trucking in 2022. And what a difference a year can make. In 2021, demand boomed. Tender rejection rates hovered above 27% during the spring and summer and spot rates peaked at 31 cents per mile above contract prices. 109,340 new carriers flooded the market, 70% of which had one truck, according to FTR Intelligence.
Statistics from 2022 tell a different story. More than 6,000 trucking authorizations were revoked in June 2022, finds an FTR Intelligence analysis of the Federal Motor Carrier Safety Administration. And truckload spot rates declined by 22.6% in the second quarter, according to Coyote Logistics’ Truckload Market Forecast.
A softening market means that shippers hopefully have fewer fires to put out, but it shouldn’t be a pass to sit back. Instead, the carriers, analysts, and technology providers Inbound Logistics talked to recommend using this time to cultivate relationships and build a game plan for the next cycle.
Here are 15 suggestions to maneuver your freight into 2023.
1. Don’t Panic
Executives may have noticed a disquieting headline or two when reading about the economy over the past year. But don’t hit the fire alarm over any individual indicator.
“Shippers should be wary of reading into any specific variable and drawing a holistic conclusion about what it means for the future,” says Andy Schmahl, partner and managing director at the Boston Consulting Group.
“Often this data is cherry picked,” he adds. “For example, if inventory levels are rising, then we must be in a freight recession.”
Rather than focusing on specific economic indicators, collect more data, have more conversations, and don’t overreact to the micro. “Keep looking macro,” Schmahl says.
2. Be Wary of the Spot Market
“Don’t fall into the trap of thinking that the spot market is your answer to recouping all of the past year’s costs,” warns Dean Croke, principal industry analyst at DAT, an analytics platform and loadboard headquartered in Denver, Colorado.
While spot rates have fallen, switching providers can increase the risk of poor service.
“If shippers go to the broker market, they don’t know who’s hauling their freight, how they’ll handle it, or if they’ll treat customers right, or even be on time,” Croke says. “Risks pop up that compromise any potential savings.
“You only need one load to go wrong and everything comes to a grinding halt,” he adds. “It could cost much more than you save.”
3. Be Flexible
Businesses must embrace agility. That could mean trying different transportation modes, experimenting with new distribution points or even just using data to find inefficiencies in shipping patterns.
For example, ArcBest, a freight brokerage and logistics provider headquartered in Fort Smith, Arkansas, has helped customers navigate around backlogs by finding new ports of entry.
“The West Coast got a lot of press early on, but backlogs spread to other ports as well,” says Dennis Anderson, chief customer officer at ArcBest. “We have to look around the corner for our customers, to enable them to respond to these fluctuations.
“There’s no one cookie cutter answer for everyone,” he adds.
4. Plan Ahead
Because the trucking market is cooling, don’t assume you don’t have to take the actions you wish you had in 2021. There’s a tendency to retrench when volumes start to dip—workloads fall and employees need time to regroup. But “that tight market showing up in the rear-view mirror will be in the headlights again in the future,” says Ken Sherman, president of Atlanta-based IntelliTrans, a technology-enabled transportation management service company.
Sherman suggests companies use that extra time to plan for the next business cycle.
“Now that you’re not fighting fires at every turn, it’s time to start asking, ‘what do I wish I had done last year? What technology did I wish I had?’” he says. “Now is the time to make sure that you have it.”
5. Become a Shipper of Choice
“If I were a shipper, I would think of anything I could do to get carriers to want to work with me,” advises Ryan Frederiksen, vice president of operations at Ruan, a transportation logistics provider based in Des Moines, Iowa.
It won’t be enough to agree to a particular rate. Organizations must also be considerate of how they use a carrier’s resources.
“The shippers who find capacity most easily will be the ones who get drivers in and out of a facility quickly, and who don’t hoard equipment or create inefficiencies in the carrier network,” Frederiksen explains.
“Carriers cannot afford to have a trailer sit somewhere because a shipper isn’t considering the impact their delays are having on the overall network,” he adds.
6. Be In It For the Long Haul
When negotiating, be aware that carriers are looking for long-term partnerships, and they want to work with organizations that have a similar outlook.
“When I talk to customers, they want to plan the next five years, not the next five months,” says Matt Parry, senior vice president of Werner Logistics, a third-party logistics provider based in Omaha.
“I want to understand who the customers’ partners are, who they have worked with over the years,” Parry says. “And I want to work strategically with them to build a resilient business.”
7. Use This Time to Fortify Relationships
“This isn’t a time to put the shoe on the other foot and take advantage of an abundance of capacity,” says Frederiksen.
Despite a loosening market, labor and equipment scarcity could still put pressure on supply networks through 2023. In the past, softer markets might have been viewed as an opportunity to hunt for cheaper rates. This year, shortages could force carriers to be judicious about who they work with.
“There’s no short-term play here,” says Frederiksen. “Life will be more difficult for shippers who throw their carrier relationships overboard.”
8. Forget About 2021 Rates
One appreciable difference between this year and last is operating costs. Running a truck costs 20 to 25 cents more per mile than it did in 2021, Croke estimates.
“Shippers should be aware that the cost of diesel, tires, wages, and food at truck stops has raised base expenditures substantially,” he says. “Carriers have also had to hike driver pay, and they can’t take back those increases.”
For that reason, 2022 rates might look a little different than last year’s prices.
“Everyone’s expenses have gone up substantially over the past six months, probably more than ever before,” explains Croke. “So don’t expect last year’s rates to be a good guide to follow.”
9. Look at the Whole Equation
When setting goals for an organization, executives should weigh transportation prices against the service levels they expect to receive.
That equation differs from company to company. Some shippers operate in a competitive market, where savings take priority. Others place a greater emphasis on service. The key for shippers is to find a provider whose level of value matches their own.
“You can find a $58 hotel room on Travelocity,” says Parry. “You save money, but is that the room you want to stay in?”
10. Leverage the Strengths of Your Carriers
One welcome change in the current market is a break from trying to secure capacity at any cost. Shippers now have some breathing room to reevaluate and diversify their carrier base.
To capitalize on the opportunity, shippers should strive to understand the strengths, and the needs, of their providers.
“Everyone has different advantages in different lanes,” says Frank Hurst, president of Roadrunner, an LTL carrier based in Downers Grove, Illinois. “We sit down with our customers and have very open conversations about cost, our lane needs, and how their freight fits in our network.
“That way, we can be a cost advantage in those long haul lanes,” he adds.
11. Find Carriers that Track Data
If you’re in the market for a new carrier, look for one who collects fleet performance data and uses it to improve their service.
Take vehicle upkeep. Asset maintenance has gotten more costly since 2020. Parts shortages have culminated in more trucks being down, leading to an increase in expedited shipping for some carriers.
Shippers should not assume they aren’t impacted by issues like these. “Untracked vehicle maintenance will eventually lead to an issue that compromises the end-customer experience,” notes Jessica Kim, head of marketing at Pitstop, a Toronto, Canada-based predictive fleet maintenance tool.
Instead, carriers that use predictive intelligence can get ahead of shortages and guarantee a better uptime, Kim adds.
12. Work With a Non-Asset-Based third-party logistics provider
Tom Nightingale, CEO of AFS Logistics, headquartered in Shreveport, Louisiana, recommends shippers who use a 3PL to source transportation find one that is non-asset-based.
“I say this because there are great 3PLs out in the market that are asset-based and even asset-biased,” Nightingale notes. “They have to fill their own trucks first.”
A non-asset-based 3PL, in contrast, isn’t interested in which carrier gets a load. Their only mandate is to help the customer.
“It can be a true asset for a shipper,” Nightingale explains. “There’s no factoring in where the closest facility is that the 3PL owns, because they don’t own the facility.”
13. Prioritize Specialized Capacity
Driver shortages pose a perennial challenge for carriers. The industry was shy 80,000 drivers in 2021, according to American Trucking Associations statistics.
The predicament is amplified in the flatbed market, where the nature of the job makes recruiting difficult. It’s engendering tighter capacity, says Kent Williams, executive vice president of sales and marketing at Averitt Express, a freight transportation provider headquartered in Cookeville, Tennessee.
For that reason, Williams recommends that shippers prioritize finding flatbed capacity first.
“Emphasize locking flatbed capacity in, even before dry van,” he says. “Capacity won’t loosen as much as it might with traditional dry van, because the pool for those drivers is shrinking.”
14. Use a Digital Platform
Today’s unpredictable economic environment is forcing shippers to rethink costs in every aspect of business. But in transportation, shippers are simultaneously under pressure to meet a consistent service level.
Utilizing a digital platform to book loads offers one solution to that conundrum, says Eftim Eftimov, president of Ship.Cars USA, a provider of automotive transportation software based in Wilmington, Delaware.
Digital booking allows for straightforward comparisons on load availability, price, and service level assurance, which “pares down costs and improves speed-to-market,” according to Eftimov.
There are several options on the market. “Shippers should evaluate the offerings, and then capitalize on one sooner rather than later,” adds Vladimir Kadurin, head of product development for Ship.Cars USA.
15. You May Need More Than One Strategy
“There’s no one silver bullet,” says Nightingale. “There are a lot of different trucking techniques that may have been used independently before. Now most of them have to be used in concert.”
The aim should be to look at the current environment holistically.
“Don’t just say, ‘We can save money by taking a parcel and making it slower.’ Maybe the answer is to move from parcel to LTL. Maybe the answer is to move from LTL to truckload. Maybe it’s a network optimization study.
“It’s about looking at things in their entirety.”
There’s a truckload full of strategies that shippers can take to ensure their freight keeps moving.
Recruiting Gen Z to Combat the Driver Shortage
A parallel challenge for the trucking industry is its aging workforce. Nearly 60% of drivers are at least 45, and 23% are older than 55, finds a 2021 Coyote Logistics/Emsi report. Having enough drivers to ensure ongoing capacity requires bringing young people into the fold.
One major obstacle is minimum age requirements. Commercial driver’s license holders must be at least 21 to operate in interstate commerce.
“You can learn to become an electrician or a plumber right out of high school, but you can’t immediately become a trucker,” says David Cook, director of sales at CPC Logistics in Chesterfield, Missouri.
The industry is finding work-arounds for this conundrum. Some, for example, recruit young people to work in another position at a company, where they can eventually move into a driving position.
This way, young people are exposed to a trucking career—and the living it affords.
“It’s a draw, for sure,” Cook says.