Jan/Feb 2023: The current freight market condition is on the softer side. Up until recently, the freight market was tight due to surges in demand based on pandemic-era capacity. This led to higher truckload cost and greater profitability for carriers.
Fast forward to today, and supply has surpassed demand causing truckload cost and carrier profitability to plummet as indicated by the purple line. Experts agree that soft market conditions will continue through 2H 2023 as inventory levels normalize.
That said, freight market balance could come sooner as small carriers idle trucks due to higher operational/ fuel costs, tax/ tag renewals, and if there is a healthy seasonal spike with Spring produce. At this point, it’s anybody’s guess. All the best shippers can do is prepare for any scenario as 2023 plays out.
Also referred to as transportation management, freight procurement is the process of finding, vetting and transacting with trucks & drivers (also known as carriers) to move company goods (also known as loads, shipments, or freight) from one location to another. Truckload cost is driven by supply and demand.
Shippers who have embraced tools to effectively navigate freight market cycles have no problem delivering goods on time, and paying a fair market price– no matter the market condition. This resource page helps shippers understand:
The freight market is similar to the stock market. Supply and demand drive truckload cost. The balance between supply and demand can change at any moment due to a variety of factors, including but not limited to conflict, the economy, natural disasters, labor strikes, and seasonality. Therefore, truckload price is extremely variable, Logistics Management called it “emulating a boom-and-bust cycle”. When there’s excess supply (carriers) and rates fall, trucking companies exit the market. When rates rise, new trucking companies enter the market until carrier saturation occurs and rates fall back down again. It’s a vicious cycle. The key is to find ways to stay on top of freight market twists and to pivot quickly with little notice. Remaining static is not sustainable because freight supply and demand hardly come and stay in equilibrium.
Freight Market Supply (# of carriers):
Freight Market Demand (# of loads):
Transportation teams are deemed successful when they deliver goods on time (100% OTD), while paying a fair truckload cost (managed transportation budget). But with fluctuating freight market dynamics, this is difficult if the team does not have the proper tools to manage volatility on the fly. Forward-thinking shippers understand the latest technological advancements and embrace the need for change to reduce waste and increase profitability. If your transportation team’s mindset, processes, and/or tools have not changed in recent years you are missing out on high-potential cost-reduction opportunities.
Here are 2 new freight procurement innovations that have helped many large shippers uncover resilience, sustainability, and cost reduction opportunities to stay ahead of any freight market condition.
Transformational AI-powered software has upended the existing freight procurement paradigm which limits the total number of carriers a shipper can effectively manage and transact with. The software instantly finds, vets, and transacts with any carrier across America. Gone are the days of long hours onboarding new carriers, it can now be done within seconds. To read more about carrier onboarding, click here.
Shippers can now supplement RFPs and brokers by dynamically matching loads to the right carrier… at the right time… and at the right price. By doing so, shippers have reduced labor cost by 30%, reduced truckload cost by 20%, and strengthened on-time delivery (OTD) to 98%+. To check out shipper success stories, click here.
Most shippers rely on historical 1st party data, and/or market averages to make important freight procurement decisions. Without actionable, real-time data, the transportation team can not respond quickly to unexpected shifts in freight market supply and demand.
With the onset of automation, data collection and centralization has occurred. Forward-thinking shippers have partnered with companies that provide 100% freight data transparency to obtain advanced truckload data resulting in stronger, informed, data-driven decision-making. Plus, executive-level reporting can be filtered for custom storytelling to effectively report up and out. To see sample reports, click here.
Transportation teams are on overload. Lack of resources is one of the key reasons why transportation is forced to restrict the number of carriers they interact with. They place all their eggs in one basket by relying on less than 6% of the total truck universe. This makes it impossible to achieve their goals of delivering goods on time at fair market cost.
Although freight rates continue to decrease, our assessments have shown that shippers are still leaving 12-18% of truckload cost on the table because they have not adequately adjusted freight rates based on current market conditions. Our 100% confidential, complimentary assessment will uncover where you are:
To schedule a free assessment, click here.
Are you a non-logistics professional looking to understand more about freight procurement? Click here to read “Executive Guide for Non-Logistics Decision Makers: Understanding Freight Procurement Pitfalls And How to Overcome Them”.