Fear and loathing on the operations floor
Falling spot rates, falling contract rates and falling revenues create rising stress and blood pressure in truckload operations teams. Typical symptoms of a soft market at an enterprise truckload carrier include the following: pockets of excess truckload capacity; uneven truckload tender behaviors; customer internal load boards showing the same load you were told “we just didn’t have the product for”; and angry drivers threatening to leave for another carrier that more than likely is going through a similar situation.
The next step is to find the pricing analysts and sales teams, with the goal to instruct them to fill the gaps. Often not mentioned is the cost and impact on the existing customer/freight mix when the floodgates open.
Another unforeseen factor is trailers and equipment utilization. A more rational person would expect trailer velocity to improve relative to fewer truckload orders from a customer distribution center. But as often is the case with lingering inventories, customers will happily use extra trailers at a 75-trailer pool as storage while paying the $50 to $75 storage fee. It’s after all, much cheaper for the customer than the carrier, which must still make payments on that trailer.
Solutions and next steps are difficult. Talk to customers about fixing trailer inefficiencies and if they’re the especially generous type, they could happily offer those trailer spaces to another carrier, leaving you, the incumbent, out high and dry. Most likely, you’ll be told next week you’ll get more load tenders, as the transportation planner mimics the reverse of what carriers do in a high-rate environment. Spread the pain around, and prioritize certain carriers for overflow tenders based on service levels and rate.
Delivering a sustainable final-mile future with Guru Rao
On Tuesday, FreightWaves interviewed Guru Rao, founder and CEO of nuVizz, a delivery management and route optimization company, about identifying and implementing sustainable last-mile delivery processes.
Rao has more than 30 years of experience in software development and supply chain management. He’s worked in software roles at Manhattan Associates and IBM, as well as supply chain solutions at The Home Depot and Kohl’s department store, in addition to being the CEO and founder of nuVizz.
For the last-mile delivery segment, one major challenge for both shippers and carriers remains identifying and quantifying emissions to determine their scope 3 environmental impacts. Rao outlined some strategies and technologies companies are taking, including route optimization software, to tackle these challenges.
Regarding scope 3 emissions, the fascinating takeaway is we’re still in the Wild West when determining who does what and how much one actually emits. Some suggest using a European standard on emissions, which can include attempting to measure carbon emissions involved in all actions leading up to the truck’s fuel tank, then calculating a separate emissions impact on what happens during the actual transportation of goods.
You can view the entire episode here.
Market update: Excess trucking capacity searches for limited volume
Outbound tender volumes resemble a distinct lack of volatility as seen in the past four years of SONAR data. Based on the data and graph above, it suggests that the pandemic-related boom in consumer goods buying has subsided, with tender volume levels closer to 2019 than any of the last three years.
This distinct lack of volatility bodes poorly for carriers competing for fewer loads. This week’s State of Freight webinar highlighted the current sluggish freight market conditions.
“Capacity and the market itself has been very boring over the last little bit,” FreightWaves CEO and founder Craig Fuller said. “I don’t want to understate it.” Fuller added that many drivers are simply not hauling freight if the price isn’t right. This behavior, which can happen in tight markets, is occurring in a loose one. I’ve personally known carriers that often will wait for “the right load,” but this can be a double-edged sword when it becomes apparent their negotiation power is diminished.
Regarding if this dynamic will change, Fuller said, “The only way we’re going to lose that capacity is if it burns out because people leave the industry or the volumes start to pick up.” So far, neither option has occurred to an extent where the data is pointing in a predictable direction.
FreightWaves SONAR spotlight: For carriers, pain at the pump persists
Summary: On Monday, the Department of Energy/Energy Information Administration reported a decline of 8.2 cents per gallon of diesel to $4.294 per gallon. This is the fourth consecutive week of DOE/EIA declines, a benchmark used to calculate fuel surcharges, with the total four-week decline at 32.8 cents per gallon.
While prices are declining, not all commodities experts believe they will continue to do so. FreightWaves’ John Kingston writes, “On Monday, in an interview on Bloomberg TV, Goldman Sachs’ head of commodity research, Jeffrey Currie, whose words are watched closely in oil markets, said he saw a strong case for higher prices by the end of 2023.”
Currie noted that the bullish case has never been stronger. Kingston added that Currie cited a lack of significant spare capacity in markets, and low inventories for most crude and products, with the result that “you have no buffer to deal with the rebound in demand that is likely to come out of China.” He also cited what he forecast as “‘strong’ economic activity in Europe.”
Chinese demand for oil and diesel remains a wild card, with analysts watching consumption levels closely as the country continues to reopen from lockdown-related hibernation.
The Routing Guide: Links from around the web
‘State of Freight’ for February: Excess capacity still a damper on rates (FreightWaves)
Autonomous platooning startup Locomation denies reports of its demise (FreightWaves)
What latest BMO numbers tell us about trucking health: Weakening but not rapidly (FreightWaves)
Repair labor rates climbing, driving technician pay raises (Commercial Carrier Journal)
5 Ways to Increase Trailer Utilization (TruckingInfo)
New survey of owner-operators highlights importance of knowing operating costs (Land Line)
