Over the past four weeks, numerous transportation, logistics and supply chain professionals have contacted me and asked for something they can pass along to their C-Level executives to explain the Perfect Storm that has hit the trucking industry. One e-mail particularly affected me: “Mike, I need some help. Our freight numbers are awful and we’re experiencing some carrier issues that are affecting some very important customers. I’m concerned that since some of our “higher ups” don’t understand what is happening with freight, they will begin wondering whether we’re doing a good job. Help me help them understand the impact of the Perfect Storm.”
I know this individual and I am confident that he and his team are doing a very good job. But his e-mail underscored a very, very important point: If you are not communicating upstream in your company and doing everything you can to help your senior-level executives understand what is happening in the trucking industry, and how it is affecting your business, you are putting your job at risk! So I encourage you to take a copy of this blog below and send it out to any of the senior executives in your company who are asking why the freight budget numbers aren’t looking too good (or who might be in the future). And make sure you check out the “State of the Freight: Top 10 Takeaways from Our 1Q Shipper Survey” report.
Forget the Perfect Storm…This Is Looking Like A Full-Fledged Frankenstorm!
I began to refer to what was coming down the pike in the transportation marketplace as “The Perfect Storm” in early 2017. But I’ve realized that term may have become so common now that we’ve lost perspective on what’s really happening. So, realistically, a better word for our current situation might be a full-fledged Frankenstorm. (Our political leaders and CNN have a different term for this, but in order to retain our “family friendly” policy, we’re going with the PG Version.)
Why am I sounding the alarm bells? Recently, I received an e-mail from a CEO that read, “Mike, your Two Minute Warnings are right on and scary for shippers. Availability and canceled loads are killing us…and we are a good shipper!” I told him a few things that you—and your C-Level Executives—need to know.
Right now, we are seeing things in the freight markets that we have not seen—not even in the crunches of 2005 or 2014. So if you don’t adjust to these new realities, your freight budgets are going to be blown, you run the risk of not being able to meet your customers’ demands, and a whole bunch of people in your company will be looking at you and demanding an explanation! Sure sounds like a Frankenstorm to me!
Consider some sobering facts. At the height of the 2014 capacity crunch, Internet Truck Stop’s Market Demand Index (MDI) peaked at around 27. (The MDI gauges supply and demand. When it is between 7-10 the market is considered “in balance.” Above 10, the market favors the carriers). For the past four weeks, the MDI has been above 40! Add to that the reality that we are in January—historically one of the weakest freight months of the year!
Beyond the MDI, there are all sorts of other reports and statistics which confirm that 2018 is going to be unlike any other year for shippers who want to be able to move their freight at a reasonable cost. For example, the CFO of a billion dollar truckload carrier recently explained to me that his company hauls about 6,200 loads per week. Right now they are turning down 800 to 1,200 loads every day! Here’s another example: the second largest truckload carrier in the country is currently running at about 145% of capacity! And once again, when you consider we’re hitting these numbers in January, it makes you wonder—what will March through May look like?
For those that are still “Doubting Thomases,” you can go to our Perfect Storm Center, which features articles from numerous publications about the current state of the market, as well as interviews with industry experts on how to navigate the current market. You can also check out Wolfe Research’s recently released “State of the Freight: Top 10 Takeaways from Our 1Q Shipper Survey”. They all reach the same conclusion: This capacity challenge isn’t some temporary phenomena—there are systemic issues affecting the trucking industry that will result in very tight capacity for 2018 and on into 2019.
In conclusion, I am reminded of Winston Churchill’s famous quote "If you're going through hell, keep going." So, pass this blog along to your C-Level executives to explain what is happening in the trucking industry and how it will affect your business. And use it to let others in your company know why the freight budget numbers aren’t looking good right now.In sharing this information, it is our hope your company will be on the same page in understanding what is happening in the freight markets so that you can build a comprehensive transportation spend management game plan. In future blogs we will be focused on solutions—proactive steps your company can take to manage in an environment where capacity is, and will continue to be very tight. We have a wealth of experience that we can share with you and we know that there are steps and strategies you can pursue to navigate through this storm.