While we’re happy to leave 2021 in the rearview mirror, many of the same trends will impact the truckload market in 2022. In our white paper, 2022 Logistics and Supply Chain Trends and Outlook, we cover many of the lingering effects of the past two years, and the newest challenges truckload shippers can expect to face in the year ahead.
Last year, truck capacity demand 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 indicate 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.
How to Manage Truckload Macro Trends
The ongoing driver shortage will continue to contribute to rate volatility as carriers seek to secure capacity. Regulatory efforts, such as lowering the minimum age for commercial drivers, attracting female drivers and tapping military drivers, could alleviate some of the pressure in the coming months.
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.
It’s not as easy as just building more trucks. Class 8 manufacturing capacity has slowed to record levels, with backlogs of a year or more. 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.
Given the rise in rates, nearly 100,000 new owner-operators have entered the market but haven’t had much of an impact on capacity. Many of those drivers represent a shift in capacity as leased owner-operators and company drivers go out on their own to participate in the higher rate environment, rather than wholly new capacity entering the market. 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.
How to Become a Shipper of Choice
Given that there’s no shortage of freight, the market is not as much about pricing as it is about ensuring shippers have the space they need. Shippers are in a competition for capacity.
The way to win that competition is to understand carriers’ priorities and align operations to make your freight more likely to win the battle.
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.
Consider a Managed Transportation Services Strategy
To navigate the complexities of the truckload market in 2022, many shippers are relying on a managed transportation services (MTS) provider. Working with a managed transportation partner, particularly if they’re able to provide more robust, comprehensive 3PL services can function as an extension of your business.
An MTS partner insulates the company from the day-to-day stresses of securing capacity and managing individual shipments.
Adapt to Truckload Trends With a 3PL Partner
Given the expected volatility across the supply chain, shippers who leverage strategic partnerships will set themselves up for success. A proven logistics provider like GlobalTranz can supply the people, processes and technology to position your supply chain for success. Request a consultation from GlobalTranz today to have a shipping expert reach out to you.
For more insights to guide your supply chain planning, download our new 2022 Logistics and Supply Chain Trends and Outlook below.