Trucking trends of 2021: Buying growth, expanding capabilities
It’s the end of the year and for the trucking industry, disruption, record profits and new opportunities are all major themes to consider when predicting trends to watch in 2022. The trucking expansions into the LTL space and final mile and acquisitions of regional carriers indicate strategic adjustments for large trucking carriers, which traditionally focused on the middle-mile space. Brokerage expansions and investment in technology underline the challenges shippers are facing in this tight capacity environment. Below are a few highlights of these trends from 2021.
Buying less-than-truckload carriers:
- Knight-Swift Transportation bought a nationwide LTL network after purchasing AAA Cooper Transportation for $1.35 billion and Midwest Motor Express for $150 million.
- Canadian trucking and logistics provider TFI International bought UPS Freight for $800 million, relabeling the company as TForce Freight.
Growing fleet count and capabilities through purchases:
- Werner Enterprises purchased an 80% equity stake in ECM Transport Group, holder of two regional truckload carriers based in Pennsylvania, adding 500 trucks, 2,000 trailers and more than $100 million in annual revenue.
- Werner Enterprises bought final-mile carrier Nehds Logistics for $64 million, adding a fleet of over 400 trucks, and rebranded it as Werner Final Mile.
- Ashley Furniture acquired parts of Wilson Logistics, a Missouri-based carrier operating over 1,200 trucks serving the western U.S.
Brokerage expansions:
- ArcBest became a top-15 broker with the purchase of MoLo Solutions for $235 million, doubling the size of Arcbest’s brokerage operations.
- Uber Freight acquired Transplace for $2.25 billion, expanding capabilities into managed transportation.
Trucking research: Understanding shipper and carrier relationships
Research published by the MIT FreightLab suggests both shippers and carriers behave opportunistically in dynamic market conditions. This is especially true in contract pricing and tender acceptance, with carriers more focused on current pricing and load tendering behavior in addition to customer characteristics like detention and dwell times.
This is important, as trucking and logistics is generally considered a relationship-driven business, one in which carriers and shippers will haggle over contracted prices during a bid cycle in exchange for volumes or the understanding that rates will be honored during freight downturns or upswings.
The research points out that these contracted lane relationships are nonbinding in terms of volume, frequency or capacity commitments, a unique aspect of truckload transportation compared to the procurement of other services. When a long-term contract is entered into for a lane, or an origin and destination pairing, the only binding agent in this agreement is the price that the carrier agrees to move the load for.
Find a link to the full paper here.
Research highlights:
- Industry data shows shipper and motor carrier relationships change as markets cycle.
- Carriers appear to be short-term focused, responding to shippers’ current market behaviors.
- Shippers must prioritize certain tight market behaviors for high tender acceptance.
- Shippers should price competitively to current market rates and tender consistently.
- Destination facilities should reduce dwell time to receive higher tender acceptance.
Food for thought:
While sales and pricing play a huge role in finding and developing customer relationships, this research suggests that other factors, such as current market pricing, customer facility characteristics and tender consistency, play greater roles than ideas of reciprocity if the business cycle changes. This is backed up from my experience, as both the shipper and carrier will adjust their tendering or load acceptance behavior based on price and facilities over previously agreed upon contracted rates and volumes.
Market update: Headhaul Index weekly change shows market destabilization
Analysis courtesy of Zach Strickland and the FreightWaves Daily Watch.
The Headhaul Index continues to show increasing potential for destabilization in the Atlanta market coming out of the Christmas holiday. A strong uptick in outbound tender requests in relation to inbound could be a signal that the market may move closer to an undersupply situation in the coming weeks. Atlanta has already seen an increase in outbound rejection rates and is the second-largest outbound market in the U.S. Other markets of interest displayed in blue on the map include the Seattle market, where weather continues to be an issue and the Columbus, Ohio, market, home to a significant number of large distribution centers. The weekly change in the Headhaul Index is a good way to identify where capacity conditions may be changing in the coming days to weeks as it measures changes in the balance of tender volumes.
FreightWaves TRAC lane spotlight: Detroit to Chicago
Summary: Van rates continue an upward trend as tender rejections reach record levels due to limited capacity.
Highlights:
- Detroit to Chicago outbound tender rejections increased from 18 basis points (bps) Dec. 1 to 33.05 bps on Monday, an 83.6% increase.
- FreightWaves TRAC spot rates for this lane stand at $3.66 per mile, a 33 cent increase from mid-December lows.
- Chicago to Detroit outbound tender rejections stand at 28.31%, indicating tight capacity in both markets.
Carriers: Pay close attention to driver availability numbers and take into account drivers taking extra days off at the beginning of 2022 when booking or accepting customer freight. If you have extra capacity, consider spot freight first due to elevated margins (after determining that this will not disrupt most of your contracted committed lanes).
The Routing Guide: Links from around the web
Modeling Effects of Natural Disasters on the US Truckload Market (FreightLab)
Werner’s founder gets FTC penalty for not disclosing stock purchases (FreightWaves)
China’s love-hate relationship with its internet startup sector (The Information)
Austin’s I-35 again has worst traffic for truckers in Texas (FreightWaves)