As the year winds down, we're finally starting to see the pressure ease. Lower freight rates and improved capacities top the list of improvements. But, before we get our hopes up in a volatile freight industry, let’s look back to when things started to unravel.
In 2017, we had two major hurricanes in the US (Harvey and Irma). The aftermath created a huge demand for trucking resources. FEMA, like a huge vacuum, sucked up all the available capacity they could. This drain created a massive shortfall for shippers. Add to this a robust retail market and the implementation of new DOT Regulations and you have the perfect storm.
We have all experienced the chaos created by these events. A big question on people’s minds is where do things stand today and moving forward?
The Industry's 3 Biggest Challenges
Obviously, we cannot predict the future. However, there are some things we can learn to better understand carrier challenges. Armed with this information, we can either help mitigate increased costs or face the reality that transportation rates have established a new baseline.
Certainly, a robust economy can have a positive effect but with higher haul rates and more opportunity, that economic boost also adds stress to the driver and equipment resources in the mix. For now, let's take a closer look at the challenges capable of having the greatest negative impact:
- New DOT Drive Time Regulations
New restrictions on driver hours and the introduction of the ELD electronic logging device have had a big impact on capacity. Without available driver time, the largest equipment fleets remain parked. The ELD has forced out many older drivers and operators who skirted the rules for years, giving them advantages. The new regs have caused carriers to alter how they approach many shipping lanes. The net result has led to higher transportation cost to shippers.
- Driver Shortages
There are many facets surrounding the current driver shortage. And, according to one industry source, the shortage we're seeing today will continue into the foreseeable future due to:
- Aging work force
- Driver turnover (not mentioned much outside of the industry)
- Regulations and restrictions put on drivers
The price of fuel is another big cost element in the freight industry. One way to keep up with fuel cost (where it has been or where it is is headed) is to monitor the US National Diesel Fuel Index. This site provides information to substantiate any change in FSC your carrier maybe charging.
Will 2019 see Freight Improvements?
There are still many challenges ahead. The industry has made many adjustments to offset some of the issues mentioned above. In addition, fuel prices have recently softened.
To combat the driver shortage, carriers are offering lucrative wage and benefit packages to lure new drivers into the industry. Hopefully, this strategy will pay off.
In many areas, capacity pressure has eased. As a result, you may be experiencing more available capacity and competitive pricing. How long it might last is unknown. Analysts in the investment world provided their outlook in a 2019 trucking rates forecast this past fall.
Is your company seeing lower freight rates and capacity improvements? Let us know in the comments below. Your response may help other customers plan their transportation strategies for 2019.
Post by: Aaron Pascarella, Customer Service Representative