Freight boom, ELDs created ‘most disruptive time seen in trucking’

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Updated Sep 23, 2018

Economists and analysts last week at the annual FTR Conference recapped what was referred to as a “year of upheaval” in trucking, in which the combination of unexpected economic growth, the implementation of electronic logging devices and major hurricanes forced record-tight truck capacity and historically high rates.

Here are highlights from the conference’s myriad of sessions:

‘Most disruptive’ time in trucking

The last year has been “the most disruptive time we’ve seen in domestic transportation,” said John Janson, who’s worked in the shipping side of the industry for more than 20 years. Janson spoke on a panel titled “A Year of Upheaval.”

ELDs have turned many former-one-day trips into two-day trips, said Janson, which has increased shipping costs and put a major focus on trailer and driver turn time, he says. “You have to start shaping the company and operations to accommodate,” he said. Rate increases have “put inherent pressure on shippers to say, ‘what can we control?’,” he says, with an emphasis on “[making] ourselves a more desirable customer” to carriers.

“It doesn’t look any brighter for shippers in the upcoming months and years,” he said.

Shippers caught off guard 

Bruce Ridley of major shipper Packaging Corp. of America said he thought his company was “headed for a tropical storm,” relative to changes in transportation and shipping costs for 2018. Rather, they and other shippers were hit with “a perfect storm,” he said, referring to freight growth and ELDs. His company has put an emphasis on building relationships with carriers as a means to control their shipping costs and head off the impacts that the record-tight capacity and rates have wrought on shippers.

Flatbedders to pull in $100k?

Don Daseke, president and CEO of flatbed conglomerate Daseke, Inc., made a bold prediction about the future of pay for flatbed company drivers: He foresees annual pay for flatbed drivers climbing from the current $60-$65,000 to above $100,000 in five years, due to the limited flatbed capacity and the need for drivers in the segment.

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The onus will be on shippers to fund that massive pay bump by paying higher rates, he says. “Shippers will have to bear the costs,” he says. “I don’t think that pressure is going to lessen. We try to be more efficient and we urge our shippers to be more efficient, but there’s only so much you can do there. Shippers unfortunately will have to pay the price for us to get drivers.”

Economy, rates to hold strong

Though the current economic recovery is now in its ninth year (most economic expansions last only about five years), indicators point to continued expansion, said Bill Strauss, an economic advisor for the Federal Reserve Bank’s Chicago branch. He expects growth to continue into next year, saying there’s “a very good possibility” that the expansion will hit a record for consecutive months of economic growth, which would be set in July.

2017’s tax reform law has “foisted growth,” he said, saying it’s added a “sugar high” to the economy, which will settle down some next year.

Likewise, FTR’s own outlook is for the economy to continue to grow and for trucking to continue to reap rewards. Rates growth has moderated already, says Avery Vise, FTR’s Vice President of Trucking, and he forecasts that trend to continue. Truck availability hasn’t increased, but load availability on the spot market has declined some after it shot upward late last year. “A lot of it is the market finally responding,” he said, with carriers and shippers entering into new contracts that siphon freight away from the spot market. FTR’s Trucking Conditions Index, a measure of a myriad of factors that impact carriers, “will remain very strong,” says Vise. “It will moderate gradually, but even a year from now we’re looking at things being quite strong.”

Truck, trailer orders on record tear

North American Class 8 truck orders have surged to record highs over the past 12 months in response to the industry’s maxed-out capacity and other factors, and analysts at FTR see no signs of orders slowing down in the coming year.

Four of the all-time top six years for trailer orders have occurred since 2015. Likewise, four of the top five months for truck orders have occurred this year.

FTR projects Class 8 orders in North America to total 315,000 this year and 340,000 in 2019 before moderating some in 2020 and 2021. Trailer orders, which have also set records in recent months, are also forecasted to remain strong. FTR projects trailer orders to set an all-time yearly record this year with 310,500 orders. They project trailer orders to be 305,000 next year before dipping some in 2020 and 2021.

Also, two other pieces from Overdrive sister site CCJ from the FTR Conference that are worth a read:

Traditional OEs, suppliers offer update on autonomous, electric initiatives 

Finding the final mile: Competition heats up among Amazon, carriers as e-commerce reshapes transportation