Trimble’s (NYSE: TRMB) newly released Transporeon report identifies overcapacity and nearshoring as two of several key factors impacting the future of the truckload transportation sector in North America.
The report analyzes market trends and data based on survey responses from Indago supply chain research community members as well as the Transporeon shipper and carrier community, according to an emailed news release Wednesday from Trimble.
Westminster, Colorado-based TMS provider Trimble acquired fellow provider Transporeon for $1.98 billion on April 3, 2023.
Industry outlook
The report includes results of an April 2024 survey of supply chain and logistics executives in Indago’s supply chain research community. Asked if 2024 is going better, worse or the same as they expected in December 2023, 55% of respondents said that from a supply chain management perspective, 2024 is going the same as expected. Thirty-two percent said it was going “Better” than expected, 3% said “Much Better,” and 10% said “Worse.”
The report notes that Indago members are all shippers, and says that if carriers had been asked the same question, the responses would have been the opposite.
Supply and demand
The report states that like all markets, the transportation market is governed by supply and demand.
“On the supply side, the main issue at the moment is that there is too much capacity,” the report states. “From June 2020 through March of 2022, driven in part by the Covid pandemic, there was a big surge in the number of new carriers entering the market.”
The report cites FTR Transportation Intelligence in stating that from January 2014 through May 2020, monthly new carrier registrations ranged between 2,212 and 4,273. In July 2020, however, new registrations climbed to 5,396 and kept increasing until reaching a peak of 10,904 in March 2022.
“Although fewer carriers are entering the market today – and a greater number of carriers are also exiting the market – new carrier registrations are still above the pre-2020 monthly average,” the report states.
As for demand, the report states that domestic manufacturing activity has a greater impact on freight demand than retail imports. That’s why freight demand is still relatively weak despite a solid 7.2% increase in imports in Q1 2024.
“The Port of Los Angeles, for example, saw a 64% increase in import containers in February 2024 compared to the same month last year, while the Port of Long Beach experienced a 29.4% rise in imports,” the report states.
Nearshoring
Mexico has overtaken China as the leading source of goods imported by the U.S. The report details the growing importance of Mexico as a source of U.S. imports. It states that foreign direct investment in Mexico grew to $36.1 billion in 2023 from $35.3 billion in 2022, the most since 2013.
This investment has led to a rising demand for space. The report cites Claudia Esteves Cano, general director of the National Association of Private Industrial Parks, who says that more than $3 billion has been invested in projects to establish production plants, distribution centers and warehouses in Mexico for many companies. According to a Bnamericas report cited by Trimble-Transporeon, around 50 new industrial parks will be built in 2024 and 2025 in northern and central Mexico.
According to the Bureau of Transportation Statistics, over 7.35 million trucks entered the U.S. from Mexico in 2023, a 1.4% increase from 2022. Forty percent of these trucks came through the port of Laredo, Texas, which handled nearly 3 million incoming trucks from Mexico in 2023 – a 4.9% increase from 2022.
A Capterra report shows that 88% of small to medium-size supply chain businesses plan to migrate partially to suppliers closer to the U.S., while 45% plan to switch all of them. An Indago survey conducted in 2024 echoes the results: 44% of respondents said they have “Decreased” or “Greatly Decreased” their reliance on China for manufacturing or product/material sourcing in the past three years.
Other key highlights
The report also explores sustainability and freight fraud, stating new emissions standards for heavy-duty trucks at both state and federal levels are accelerating the switch to more emissions-friendly vehicles, with forensic carbon accounting and measurement a potential legal necessity for shippers and carriers.
Hurdles such as mileage range and charging infrastructure are among the limitations preventing fleets from adopting electric vehicles at higher rates.
Freight fraud is a growing risk in the truckload sector, with CargoNet reporting a 59% increase in cargo theft in Q3 2023 compared to Q3 2022. An April 2024 survey found that 48% of respondents had experienced cargo theft or freight fraud in the past year.
“We are confident this report will be a valuable resource for shippers and carriers at a time when the industry acknowledges it has been bumping along the bottom for a long period,” said Ed Moran, Americas managing director for Transporeon, in the release. “By recognizing important trends and identifying how such trends might support business growth, all parties can proactively exploit collaborative digital tools that meet the demands of shippers and carriers alike.”