Heading into the all-important holiday season, the good news is that trucking and logistics professionals can expect to benefit from the typical seasonal surge in spending that comes with gift-buying and retail promotions. That marshmallow of optimism might be floating in a mug of bitter hot chocolate, however, because the bad news is that some of the less favorable structural trends impacting the industry show no sign of reversing. Freight rates have actually dropped lower in recent weeks.
Like any other business, trucking is all about supply and demand, and while we have seen some smaller carriers go out of business, the supply of trucking options still exceeds the market demand. And until and unless that changes, freight rates are likely to stay low. Brokers are posting freight online and loads are getting snatched up very quickly. As long as that dynamic persists, brokers won’t need to negotiate, and rates will likely stay suppressed. Even the usual holiday infusion of economic energy into the marketplace might not be as significant as in past years. A recent CNBC supply chain survey found that big retail orders seem to be lacking and there are early concerns that consumer spending might be relatively weak. Inflationary worries and lingering economic uncertainty appear to be contributing to a more pessimistic outlook. High level executives from big brands like FedEx and Target have echoed those cautionary notes and suggested that restocking remains sluggish for many retailers. In the November 6th article reporting the survey results, it was reported that trucking professionals have a similarly unenthusiastic opinion about the weeks and months ahead:
“Trucking companies get paid per load, and the low expectations for orders imply potentially lower revenue this holiday season. Logistics executives were split on LTL (less-than-truckload) freight rates for the first quarter, with half looking for a 5% bump and the other half expecting rates to be unchanged to down as much as 15%. The majority believe rates for full truck loads will be unchanged or down, while 33% expect prices to be up marginally at 5%.”
The hope is that some of this pessimism is misplace, and that the holiday season turns out to be more of a boon to the economy and to the trucking business than many analysts and observers predict. We can say with confidence that despite year-to-year fluctuations, the broader trend is that year-over-year volume continues to rise, with more overall activity and more truckloads of goods moving than ever before.
The winter season also comes with its own unique challenges and characteristics, including the tendency of carriers to run extra hard leading up to Christmas, followed by a post-holiday slowdown when many will be taking a well-earned break. From an operational perspective, experienced drivers know all too well that the winter season can incur added costs and inconveniences. From additional maintenance demands and higher spec on things like oil and tires, operational costs do tend to rise when the thermometer falls. Winter weather delays could cause delays which can also impact the bottom line. And while many operators will be thoughtful and strategic about route planning and regional focus to avoid some of those cold weather effects, there is obviously very little that can be done to avoid them entirely.
With thinner margins and complex challenges ahead, it’s more important than ever that truckers identify a trusted and reliable partner to provide them with financial, technical, and logistical support. From owners and operators with a single truck, to small-to-mid-sized trucking companies, the potential benefits of the right support partner are significant and potentially dramatic. The result can be more flexibility, profitability, and efficiency—all with fewer headaches and reduced risk. And those are outcomes that every trucking professional wouldn’t hesitate to put on their wish list this holiday season.