Is it possible the logistics industry won’t see a substantial rebound until December 2024?
That was the idea posed by Josh Bouk, chief partnership officer at TriumphPay, on the Stockout Monday, during an interview with FreightWaves’ Mike Baudendistel and Grace Sharkey. The prediction stands out as a departure from more optimistic projections that expect a turnaround to come in the second or third quarters of 2024.
TriumphPay plays a pivotal role in the logistics industry, functioning something like the “Visa of global logistics,” as Bouk put it. The company specializes in the frictionless settlement of logistics invoices, serving a wide array of shippers, brokers, third- and fourth-party logistics providers, carriers and factors. The company has visibility into nearly $50 billion in freight transactions and makes payments to more than 280,000 carriers each year.
This extensive visibility grants TriumphPay a unique perspective on the movement of goods, particularly in North America.
Current market dynamics and TriumphPay’s role
Truckload spot rates have stagnated for much of 2023. Despite increased retail and consumer packaged goods sales, there hasn’t been a corresponding rise in rates. And regardless of rising tender volumes in recent months, rejection rates have seen only slight shifts. This suggests an industry still coping with unbalanced supply and demand dynamics.
The impact of these market conditions on the brokerage sector is significant. Bouk observed the variety of performance among brokers, with those focusing on sustainable profitability faring better. He underscores the importance of cost and margin management, especially in the next 12 months, implying a critical period for brokers before any notable increase in freight rates is seen.
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Bouk also delved into the recent surge in online spending, particularly the record sales during Black Friday (up 7.5% over 2022). But he questioned the depth of these spending trends and their true impact on the trucking industry and overall economic health.
“Our money is on probably 12 months before we see material increases in freight rates,” Bouk said. “If you’re a broker, it’s going to continue to be time to stay the course, manage margins, do good work, take good business and then manage your costs.”
In this scenario, where supply and demand are only slowly coming into balance, TriumphPay plays a crucial role.
Beyond simply automating logistics invoice settlements, the company’s efforts in fraud prevention (partly via a partnership with Highway) can help secure transactions.
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By balancing the financial needs of shippers and logistics service providers, TriumphPay is enabling shippers to optimize working capital while ensuring LSPs receive timely payments that are vital for their operations.
Unpacking the 12-month rebound prediction and its implications
As noted, Bouk’s prediction of a 12-month rebound stands out against the industry’s more optimistic forecasts.
This extended timeline reflects a confluence of current market dynamics and trends, with trucking rates remaining stable and tender rejection rates showing only minor fluctuations despite increasing volumes. These indicators point to a market grappling with slower-than-expected capacity attrition.
For brokers, Bouk’s forecast sets the stage for a period of strategic navigation through market stagnation. His insights suggest that brokers, especially those who have maintained profitability via prudent policies, can weather this phase by focusing on margin management and reducing operational costs.
Shippers, particularly in retail and CPG sectors, are also adjusting their strategies in response to market conditions. Bouk noted a shift toward extending supplier terms and maximizing working capital as key tactics. These measures are critical for shippers to remain competitive and prepare for the eventual market rebound.
Throughout this next 12-month period, Bouk emphasized the importance of efficient capital management and investment strategies. TriumphPay aids industry players by automating payment processes, preventing fraud and offering supply chain finance solutions.
And the company has more on the way.
“We do have some other partnerships that are in the works that will allow us to provide an increased level of transparency and visibility in the industry, in certain areas of data,” Bouk said. “But those are coming soon and we’ll have more information on that in the new year.”