Many of you are currently in the midst of budget season and the looming question surrounding all of us is, “What will freight rates do next year?” To be able to give an answer that has both logic and reasoning behind it, we will be looking at two of the key indicators that we are tracking in our Supply Chain Glass analytics tool.
First up on our data point is truck capacity. Truck capacity is simply the number of trucks operating on the road. There are two indicators for review: the number of carriers operating with 6 or fewer trucks, and the number of load tenders rejected by carriers. While the number of carriers with over 1000 trucks has grown from 34,000 in mid 2014 to over 35,000 in 2018, the variable is relatively small and does not illustrate the marketplace. In comparison, fleets with 6 or fewer trucks have grown from 187,000 carriers in mid 2014 to over 373,000 in 2019. The most recent reporting shows that carriers with 6 or less trucks are not losing capacity, but gaining through the 3rd quarter of 2019. In fact, the number of carriers has grown from 373,000 to over 376,000 in 2019, illustrating capacity strength while also reflecting a leveling off of smaller carriers starting up or growing their fleets.
Another validation to carrier capacity is the percentage of load tenders rejected by carriers under contracted lanes. Contracted lanes are typically defined by repeat loads picking up and delivering in the same lane with a carrier that has been awarded a set volume of that business from the shipper. The assumption rests with the reject percentage. If the tender reject percentage is trending higher, then capacity is tightening. Likewise, if the tender reject percentage is trending lower, then capacity is loosening. As seen in the chart, the tender reject percentage is trending lower overall with a recent spike to over 15%.
Using these two metrics, we know the number of carriers with 6 or less trucks is slowing but not yet contracting. In addition, we can see the overall tender reject percentage has normalized between 10 – 20% illustrating that we have a balance in capacity. The challenge that lies ahead is managing month end and seasonality surges in shipment activity against the existing capacity. For further questions regarding our market indicators and our business intelligence platform, and how you can access market analytics, please contact your Rockfarm Strategic Account Manager.