Last year, truck capacity need to be reached historic highs due to a combination of factors, including ongoing equipment and labor shortages. Global challenges, including port congestion, fuel costs, governmental policies, and the ongoing pandemic will be among the factors affecting over-the-road hauling across North America as we look forward through this year and beyond.
Experts predict rates will continue to be at or near market highs in the spot market as well as in contract relationships. Spot market rates might start easing in 2020 but will still be about 15%-20% higher than the previous peak in 2018. Contract rates, representing about 70% of the market, will be up about 4%-5% over 2021.
In early 2022, reports from DAT Trendlines show the truckload spot market may be reverting to typical seasonal patterns, leading to lower rates than last year but still above the long-term average. The underlying assumption behind these projections is that consumer demand will continue at similar or higher levels throughout the year. However, rising inflation, as reflected in the rising Consumer Price Index, could cool consumer spending as prices for housing, automobiles and other big-ticket items continue to rise. Still, the e-commerce boom pushes more freight into trucks as shippers re-think inventory levels to meet omnichannel demands. Equipment shortages are another constant disruptive factor. When ports are congested, chassis and containers sit idle, making it challenging to return empty containers and keep fleets circulating as they should. With warehouses running at capacity, many companies rely on containers for storage, reducing the number of units available for new loads.
Traditionally, truck orders are a lagging indicator of truckload spot market rate movements. But given the production delays, truck orders won’t result in deliveries for many months. In the meantime, carriers don’t have enough drivers for the trucks already in the fleet and are paying the drivers they do have more to remain with the company. The independent operators and small fleet owners are reshaping the market, with more capacity dedicated to the higher rates in the spot market and fewer trucks available to the large carriers.
Remember, in most cases, truckers make money only when the wheels are turning. Research from MIT indicates the average truckload driver spends only 6.5 of their allowed 11 daily service hours actually driving. That means about 40% of trucking capacity is underutilized with existing equipment and labor. The driver shortage is not due primarily to a low headcount but inefficient use of existing drivers and equipment. Carriers and drivers know which shippers respect their time and those who do not and share that information. If your locations make drivers wait too long to be spotted, loaded, and unloaded, your loads become a low priority. When freight capacity is this tight, carriers are selective about who they do business with. Fine-tuning your processes to create desirable freight will reduce wasted time for drivers and improve the likelihood you’ll be able to secure the capacity you need.
To guide the complexness of the truckload market in 2022, many shippers are depending on a managed transportation services (MTS) provider. Working with a managed transportation partner, particularly if they’re able to deliver more robust, comprehensive 3PL services can function as an extension of your business.