Opinion: A Truckload of Opportunity
B>By Don Thornton
I>Vice President, Freight Business Services
ransCore Inc.
American Trucking Associations’ Truck Tonnage Index is hovering near all-time highs as manufacturing ramps up and the economy picks up steam. This index looks at all freight hauled and is based on surveys of ATA member carriers.
To get a better picture of the current imbalance between available freight and equipment, it’s instructive to look at the exception freight market.
More freight enters this market when third-party logistics providers and brokers cannot manage loads through existing contractual relationships and when carriers get more freight orders than they can handle with the equipment they have.
Through our DAT freight-matching network, TransCore monitors total postings of exception loads as well as the total amount of equipment available to take them. We also monitor searching trends by carriers to understand markets where carriers need shipments.
Recent data illustrate how much of an imbalance we are in now and suggest that we may not climb out of it any time soon, even with the recent spike in truck and trailer sales.
In April, total searches for trucks on the DAT network — where 3PLs and brokers are looking for equipment to haul specific loads — were up 129% against the same month last year, while truck postings were down 26%. That means the demand for trucks far outstripped the supply of them.
Total load volume is also skyrocketing. The total number of load postings on our network in April was up 93% against the same month in 2003. Such a huge jump indicates renewed economic activity and it also tells us that 3PLs and brokers are scrambling to find equipment.
Looking at load-to-truck ratios confirms this. Each year, the ratio normally spikes toward the end of the year as manufacturers and retailers scramble to fulfill orders generated by Christmas sales. Then it drops in January and February and begins climbing again in the spring.
This January, the ratio was just under three loads for every truck, the highest it has ever been in any January since 1996. In April, it skyrocketed to more than 7 to 1, another record high. Before this year, the highest ratio for this time of year was in 2000 when the economy was steaming along. Even then, the ratio was around 2 to 1. The big difference back then was higher equipment availability.
The load-to-truck ratio trends also indicate that seasonal freight swings have commenced early. The normal March-May seasonal peak came early and trucks were scarce this spring.
Based on current trends, we believe the usual March-May freight peak is going to be higher than ever. Federal tax cuts have put extra cash into the hands of consumers and there will be a flurry of shipping in May and June to restock after people spend their tax refunds.
Also adding to equipment demand will be citrus and other early agricultural crops that start getting harvested in April and May. Florida, California and Mexico will all be tough places to find trucks when these crops come on stream.
The high load-to-truck ratios that occurred last fall will look mild by comparison. We see the ratios easily topping the 5-to-1 levels they reached in September and October last year. Brokers and shippers should be screaming for trucks to meet delivery commitments.
All this means that carriers will be in the driver’s seat when it comes to choosing the best freight and setting desired rates. To take advantage of this opportunity to profit, carriers should stay focused on keeping a solid team of drivers, trucks that are well maintained and dispatchers and systems that will efficiently support them. There will be ample opportunity to pick up backhauls on difficult lanes by posting trucks on load-matching services.
Carriers should be negotiating to maximize their rates per mile, minimize deadhead miles and improve payment terms with shippers and brokers.
The biggest challenge for carriers will continue to be drivers. The economic slowdown over the past few years masked a fundamental driver shortage. The recent construction boom has drawn away many potential new drivers; and the recent changes to driver hours-of-service regulations limit daily miles driven and, therefore, driver pay, thereby contributing to turnover and further shortages.
However, in an attempt to compensate drivers, many of the large carriers are passing on stop charges and detention fees to their drivers.
arriers that can manage their driver workforce effectively will be the most successful. There’s certainly no shortage in demand for their services.
TransCore, of Hummelstown, Pa., provides technological services and products, including freight matching, asset tracking and communications.
This story appeared in the June 14 print edition of Transport Topics.
