Many notions regarding the freight market are taken with a grain of salt. While something might be true for a while, it doesn’t necessarily last. The only notion pertaining to the freight market that is universally accepted is the inherent volatility involved, one that certainly should not be taken with a grain of salt. For decades the freight market goes through cycles- whether that be between a carriers or shippers market, or increasing/decreasing rates, every side of the coin will see the light of day. This is especially true given the circumstances surrounding the COVID-19 pandemic, with volatility throughout all supply chains being fickle and difficult to forecast. To truly encapsulate where the freight market is, we must first examine what led us to this point. Trucking jobs were dwindling at the beginning of 2020, as in April of that year there was a record level of trucking positions laid off. While the following 8 months showed a blossoming amount of new trucking jobs, the ramifications of record amounts of drivers leaving the industry left its mark- one that would not easily subside. In these early months, freight was a valuable commodity, and the market began shifting in the favor of carriers. Volume was low and there was still residual demand for goods, so shippers bit the bullet and settled for higher rates to secure capacity. This trend continued for the better part of 2021, and has only recently begun shifting back toward the shippers’ favor. Over this period of time, shippers’ desperation was felt in other aspects of the freight industry. Still having need for capacity, shippers turned to the spot market in numbers that have not been reached since the 2008 US recession. This delineation of market share between contracted rates and the spot market was somewhat stable over the past 18 months or so, but this reliance has bred increased freight prices across the board. While inflation is the main factor of recent pricing surges, the use of LTL and spot market freight has exacerbated increased rates. The historic dip in trucking jobs also ushered in an influx of workers eager to get into the industry. The unsustainably large number of workers was a short term blessing in filling the need for capacity, but many truckers saw little to no profit and left the industry soon after starting. As of 2022, there is another driver shortage that the surge two years ago cannot remedy. Warehouse and port jobs have also been declining over the past two years, which add complications to a crucial aspect of the supply chain.
In the freight industry, every complication requires an actionable solution; and with every actionable solution comes an equal and opposite consequence. In this case, the influx of trucking jobs (which have been on the decline the last few months) shifted industry power to shippers while simultaneously leading to an increase in rates. The utilization of LTL & spot market freight also adds to this issue with two months left in the year. So where will this lead us to by the start of 2023?
Unfortunately, prices are estimated to continue increasing. Many Asain ports are presumed to open back up in full capacity, which has proved to be a major complication to many international supply chains. Domestic freight price increases will be levied by the Feds action regarding interest rates, which are also estimated to be raised. The best way to circumvent any complications or market repercussions is to grant visibility in every aspect of your supply chain that is possible. Given the fact that there is no way to predict market trends with 100% accuracy, there is a way to ensure that your operation has the knowledge and expertise to overcome any supply chain obstacles that will arise.