FREIGHT MARKET & THE PANDEMIC

Looking at the freight market in Q1 of 2020 is much like watching the new season of Ozark on Netflix; it first requires a brief look at what came before. My personal binge-watching policy dictates that before diving into a new season, I do a quick recap of the last two episodes to get the full impact of what is going on now.

So, let’s review what was happening at the close of 2019 in the freight industry. Everyone summed up the year by comparing it to the bull market of 2018, with slight resignation but hopefulness. The overriding sentiment was that even though the market in 2019 paled in comparison to the previous year, the industry was still experiencing growth, and we had 2020 to catch up. 

With 100,000 confirmed cases of the Coronavirus (100 of which are in the U.S.), there are questions about the safety of everything and anything manufactured overseas. Since it is believed that the virus began in the open markets of China's Wuhan province, imported foods are on the minds of the masses.

It’s the flower shippers who deserve the love on Valentine’s Day!

Most people have no idea what those beautiful flowers go through to get to you. The ones that wind up on coffee tables and office desks across the U.S. -- it’s not just a stroll down from the local flower shop. Oh, no. It is more likely that those beautiful buds have traveled thousands of miles, through various temperature zones, over bumpy roads and border crossings, to get to you.

2019 was a Shipper’s Market

Record truck orders and record freight volumes in 2018 served as the backdrop for a significant correction to the market in 2019. The year began with a plethora of trucks and freight volumes underperforming expectations. It is estimated that there are approximately 75,000 more tractors available than there is freight to fill them.¹ Shipments became easier to cover, and as a result, carrier rates were historically low. Even though economic growth continued in an upward trajectory, it was at a much slower pace than the previous year and not enough to compensate for the overabundance of equipment.

Cargo theft is an unfortunate by-product of the holiday season that often gets overlooked during the hustle and bustle of rushed shipments and tight delivery schedules. That is until a trailer disappears, or pallets go missing off the company’s loading dock. With employees taking extra vacation days around Christmas and New Year’s, freight is often unattended or stored in places where prolonged absences provide a greater opportunity for theft.

And what you can do about mitigating LTL costs ... 

LTL rates have remained high since the freight recession hit in Q4 of 2018, and to some, this is hard to understand. Conventional wisdom says that when market pricing for truckload shipments rises, so does Less-than-truckload (LTL) pricing.  Conversely, when truckload pricing dips, so should LTL, but we are beginning to see a shift in the industry that is far from normal.

Offering Customers Something More ... 

“The recent freight recession has affected the freight industry in a number of ways, making it critical for companies to maintain more direct communications, streamline processes and gain greater visibility in order to remain successful. Largely driven by excess capacity in the market, freight recessions signal a time for brokers to step up their offerings and deliver a true competitive advantage to the market to separate themselves from the competition.” - Freightwaves webinar: The Battle of the Broker: How the Freight Recession Has Impacted the Broker Market

Differentiation

There are over 20,000 freight brokers in the United States. Differentiation can be difficult when every 3PL likes to claim excellent pricing, communication, customer service, and the ability to track shipments. If you are a freight broker and don’t provide those key benefits for all your services, chances are you won’t be for long.   

Is the Freight Market Recession Improving?

Tracking packages is nothing new. Companies like FedEx and UPS have been doing it for decades. In 1994, UPS first offered customers access to a new bar-coded tracking technology. It was a huge success and enabled the company to grow exponentially.

Commercial freight carriers, on the other hand, have been slow to adopt instant tracking with the burden (and complication) of too many moving parts involved in the supply chain. With so many hands in every freight transaction, it is a miracle the process works as well as it does today.

According to Wikipedia.org, hurricane season starts in the Atlantic the first of June, but it seems official now with the threat of Dorian hitting the Florida coast sometime in the next 72 hours. The National Weather Service says it is currently a category three but is predicting it will reach category four status by the time it reaches the coast. Like a nail-biting horserace, no one is sure what to expect at the finish line until the final moment of impact.