2018's freight market has faced a strong economy coupled with strong domestic truckload demand. With varied truck and driver supply, shippers have certainly had an interesting year.
Here's our take on some transportation market trends we're seeing from our Logistics Control Center -- and what to expect going forward.
Truck/driver supply was constrained in the first half of 2018 for a few reasons:
- Many smaller carriers and owner-operators left the market in 2016 and 2017 when rates weakened.
- Hurricanes in 2017 controlled truck/driver capacity.
- January "Nor'easters" kept many carriers off the road for extended periods.
This, combined with a strong economy and demand led to unprecedented spot rates (over 30% higher than the previous year).
In the second half of 2018 we've experienced more carriers and drivers entering the leveling market due to strong rates. Spot rates are back to pre-2017 levels and are roughly 20% less than this same time last year.
Often slower to react to market conditions than spot rates, contract rates have gradually increased throughout 2018.
In our experience, contract carriers have been happy with 10-15% increases year-over-year compared to the 30%+ typically seen in the spot market.
Many asset-based carriers have been challenged with hiring and retaining drivers this year. This has led to more asset carriers switching to a “dedicated” plus brokerage model.
Additionally, more asset carriers are transitioning from majority company-drivers to majority owner-operators. These changes work well for the carriers to survive tough markets and driver shortages. However, they pose a challenge for shippers leaning on asset carriers for stability in rates and capacity, as owner-operator and broker rates reflect the spot market more than contract market.
Asset carriers that failed to secure rate increases in the first half of 2018 have "missed the boat," as the spot market has corrected at lower rates than what many of these asset carriers see as desirable.
Savvy shippers are still approving reasonable asset carrier/contract increases and not solely chasing the spot market. Relationships with asset carriers will win in the long run.
Looking Into 2019
Looking into 2019, we anticipate the economy and truckload demand to remain strong.
As for supply, that remains to be seen. Shippers avoided several dilemmas during the 2018 hurricane season with none of the recorded storms significantly impacting supply.
If we can also avoid a harsh winter, all signs point to supply remaining abundant and rates remaining level -- or even decreasing through the first quarter.
Until spring produce season...
FOCUS ON WHAT YOU DO BEST. WE'LL MOVE THE REST.
LeanCor Logistics, a division of LeanCor Supply Chain Group, is a third-party provider (3PL) of outsourced transportation management services with a dedication to relentless continuous improvement. Whether it’s simply moving your product or managing your supply chain, we have a suite of solutions to advance your company’s performance and reduce cost.
Results-driven logistics and transportation leader with expertise in carrier procurement and performance improvement, pricing, safety/rules compliance, strategy development, and supply chain implementationFacebook LinkedIn Twitter Google+