Chart of the Week: Hours of Service – Driving Utilization (11-hour), Outbound Tender Volume Index – USA SONAR: HOS11.USA, OTVI.USA
According to FreightWaves Hours of Service (HOS) data derived from electronic logging devices (ELDs), the average time spent driving fell roughly 2.5% from the beginning to end of March, despite the Outbound Tender Volume Index (OTVI) showing a 16% month-over-month increase in national load volumes—time spent driving on their allotted 11-hour clock is considered more productive due to the fact most carriers and drivers are paid by the mile. This is probably confusing to the outside observer, since more loads should equate to more drive time, right? Here are a few reasons why this is not always the case.
More volume is generally good, just not all at once
Volumes surged 30% over the course of 21 days, which is an extremely volatile figure. Volatility is the natural enemy of efficiency. Infrastructures are built around stable processes and carriers that want to grow need to build their network and infrastructure around load consistency. Knowing how many trucks are moving in and out of an area allows carriers to plan effectively by setting their drivers up with loads that will be ready for them to pick up shortly after they deliver.
Sudden unexpected increases in volume throw these networks out of balance, leading to both over and under supplied areas of the country. Dramatic drops in expected load volumes have the same effect on carrier networks, but carriers would certainly prefer the former as a problem as increased demand for their services places upward pressure on rates, which can cover their increased costs driven by inefficiency. But how does this network imbalance translate to less time on the road?
In this instance, increasing dwell time becomes a big reason drivers are driving less. Drivers are having to sit longer after loads as they drive into areas with a lot of consumption and little production as they locate their next load. They are also spending more time waiting to get loaded and unloaded as many of the shippers and destinations due to congestion. According to FreightWaves Wait Time Index, wait times at distributors increased 13% or roughly 42 minutes from the beginning to end of March.
Freight volumes did not increase evenly across all industries. Most of the volumes were derived from consumer products and the food and beverage sectors, leading to a concentration of freight around a few shippers and destinations. This concentration of activity is a big reason why there is increased congestion. The surge in demand for these goods also led to labor shortages in these sectors as their infrastructure was not set up to handle this level of demand.
Not all carriers are created equal
There is a big difference between what the larger carriers and smaller carriers are experiencing as well. The ELD data that fuels the HOS numbers are slightly skewed towards smaller carriers, while the OTVI data will be more representative of the larger shippers and carriers.
Smaller carriers are more exposed to imbalance in the national freight market as they lack the diversity in their customer base to have as many options in the areas they enter. If they are heavy into automotive, for instance, they will have to find another account to keep them moving while the factories are shut down, which can also account for less driving time.
Regardless of carrier size and experience in March, the current downward direction of the OTVI is a sign that all carriers are about to experience a similar trend towards lower utilization as the nation continues to take a pause and “flatten the curve”.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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