The State of the Trucking Market in 2021

The state of the trucking market in 2021 is uncertain, filled with risk, and continues to evolve, making logistics management challenging.  Let’s consider these top factors affecting the trucking market, their implications on supply chains and how they are driving change within the industry. 

Capacity Constraints Continue to Arise

Capacity constraints continue to come under microscope as shippers look for a better understanding to the state of the market. Top causes of capacity constraints include: 

• Increased e-commerce in both business-to-business and direct-to-consumer fulfillment.  According to eMarketer, e-commerce will grow 17.9% through 2021, but total retail sales will grow 7.9%. That’s an astonishing $933.30 billion in spending on e-commerce, and as the demands grow, there will inevitably be a marked increase in business-to-business e-commerce as well.
• High freight volumes across all industries in the trucking market are expected to continue into 2022.  The added strain on resources is on track to force high freight volumes to continue well into the next year. That will coincide with the peak returns season following the holidays, as well as economic recovery from the pandemic as vaccination rates grow.  
• Fewer labor resources are available to meet the rising demand in both the warehouse and in transit.  Talent shortages, especially limited drivers, will exacerbate the capacity crunch and result in shortages across warehousing and transportation simultaneously.  
• Capacity constraints within truckload and parcel have led to spillover within the LTL market.  Pent-up demand of customers and the strong predictions for another above-average peak season has put a unique burden on truckload and parcel transportation. The extra demand amounts to a greater need of balance between the two, resulting in spillover in the LTL market as shippers try to keep rates in check and carriers try to maintain high-profitability in moves.  
• Port backlogs, cargo limitations on container ships, and a lack of available equipment and port facility staffing.  Port activity, including shutdowns and backlogs, as well as embargoes and delays in empty container transit, will result in added congestion. Such congestion naturally leads to bottlenecks in planning drayage and eventual increases in the total cost of shipping, not to mention an added strain on trucking as the bottlenecks grow.  
• Limited available real estate has further led to challenges as construction came to a halt in the past year.  Part of the problem with the bottlenecks arising in warehousing and drayage comes from limited available commercial business real estate and warehousing space. With construction falling short over the past year, there’s simply not enough space to store goods.   
• Increasing fuel costs also play into the available capacity woes.   According to the U.S. Energy Information Agency, U.S. on-highway diesel fuel prices are up $0.898 from the end of August 2020. But variations exist between regions, e.g., California is at $4.291 as of August 30, 2021, while the Gulf Coast was at the lower end of the spectrum at $3.038. 
• Legislation may also affect change in the industry.  The forthcoming infrastructure bill may contain funds to help assist shipper needs, such as grants to increase the number of driver training facilities and kickbacks to carriers that implement added safety measures. The bill is still far from becoming law, but it’s the possible effects of the bill that could help lead to an easing of the current capacity crunch.  

A Possible Stimulus on the Horizon May Increase the Challenge of Procurement Through Peak Season

Over the past year, the prospect of additional stimulus payments has further challenged the trucking industry. The trucking market is subject to macro and micro economic indicators. A stimulus payment can provide an infusion of capital for use among owner operators and customers. A stimulus on the horizon further increases the risks of a higher trend in consumer purchasing. As a result, finding available capacity through peak season will become more Challenging.  

Average YOY Miles Have Declined Despite Record-Setting Profitability

Another factor affecting the OTR trucking market comes from the availability of carriers. With immense strain on available resources, carriers have seen record-shattering profitability. However, the year-over-year total miles driven has declined. This is a testament to the new normal that has arisen from an explosion of both e-commerce and limited drivers or limited capacity. The best way to overcome this issue is to recognize that carriers maintain control over negotiations for the near future.  Shippers need a partner in their corner that can help overcome the issues and find the most strategic carrier partnerships for every shipment.  

Higher Wait Times Are Leading to Fewer Drivers on the Road

Higher wait times on the docks due to limited staffing or unavailable equipment effectively leads to fewer drivers on the road. The ease at which drivers can pick up and drop off loads is critical to a driver’s ability to log actual miles driven.    

Flatbed Will Grow Tighter as Hurricane Season Approaches

As the industry moves closer and deeper into the peak shopping season, there’s another risk at play. Hurricane season threatens to disrupt activities across the eastern seaboard and along the Gulf of Mexico. Hurricane season causes an influx of demand for flatbed. As a result, flatbed will grow tighter as 2021 wears on, and shippers in need of flatbed will need to rethink their strategies, such as working with more regional carriers to source capacity and create long-haul moves without necessarily requiring a long-haul driver for every movement. Think of it like a string of short-hauls that can create a long-haul trip by tapping the potential of smaller, more localized flatbed drivers. 

Why Strategic Partnerships Enable OTR Freight Management

OTR freight represents a long-standing aspect of supply chain operations and transportation management. As the industry evolves and innovations improve, OTR freight management technologies offer  transportation management optimization to avoid significant supply chain disruption. As highlighted by Supply & Demand Chain Executive, in 2020, the United States Business Logistics Costs fell by around 4% to end up at an estimated$1.56 trillion. This shift shows how modern transportation networks and supply chains continuously adapt to market changes and transitions. The following represent the critical ways strategic partnerships can help supply chain managers achieve optimal OTR management for their freight despite the uncertainty of the trucking market. 

Carrier Vetting for OTR Freight

One of the most critical aspects of strong OTR freight management and operations is proper carrier collaboration and partnerships. Finding carriers that meet specific needs and help the company reach supply chain goals provides a competitive advantage within the marketplace. Proper vetting of carriers helps ensure risk management, and creates are liable network for future growth, scalability and flexibility.   

Rapid Scalability and Leveraging the Collective Buying Power of a Large 3PL

The value gained from rapid scalability and collaboration is critical for the modern supply chain. With demand for drivers often exceeding availability, shippers find themselves forced to pay more to secure capacity and drivers across many industries. Many faced repeated price increases of more than 10-15 percent over just a few years ago. Leveraging a 3PL’s relationships, people, processes and technology helps businesses balance supply and demand volatility and secure reliable and consistent capacity. 

Remote Tendering and Shipment Execution

With driver shortages still impacting the industry and continual fluctuations with supply and demand balances, it is more important than ever for OTR managers to get on board with remote tools and digital services. Delays and congestion worsen each year, inventory strains continually affect capacity, and customer needs remain ever-changing. In today’s freight market, OTR freight services enable continued growth and success. Focusing on the transportation metrics that have the greatest impact on the supply chain can help managers stay attentive to both short-term and long-term goals and needs.  

Enabling Data-Driven Decision-Making

 Access to real-time data and the ability to perform real-time analysis enables businesses to make data-driven decisions to drive efficiency into the supply chain. Descriptive analytics focuses on utilizing historical data to understand events that transpired and what happened within the network over a set period. Predictive analytics makes predictions about future outcomes based on historical data, statistical modeling, and machine learning. Prescriptive analytics works based on technology to help management make better decisions about current or future choices that will impact the supply chain network. All three of these analytical types are critical to supply chain strategy, but many businesses lack the resources and tools to use effectively. Leveraging a 3PL to analyze and provide data-driven recommendations helps businesses create continuous improvement of their supply chain in today’s highly competitive market.  

Reducing Reliance on Outdated Systems and Technology

Outdated methods of tendering, capacity procurement and freight management no longer work for today’s high-pressure and technologically driven market. Cloud-based TMS systems and innovative tools streamline shipping operations, allow for fast and reliable monitoring and control of global supply chains and OTR transportation optimization options anytime, from anywhere.  

Understanding how the OTR Market Impacts Your Supply Chain Management Decisions

The state of over-the-road transportation continues to challenge supply chains with capacity, driver and labor shortages, increasing fuel prices and unpredictable weather and pandemic related buying patterns. Knowing what’s happening in the market and what you can do to mitigate volatility will help your team and business thrive through disruption. Request a consultation with GlobalTranz today to gain visibility into your current network and recommendations for supply chain sustainability.