Trucking is coming out of its downturn. That's according to DAT Solutions, the Beaverton-based research company that provides benchmarking, forecasting and capacity planning for the trucking industry.
A steady increase in van and refrigerated freight volume, combined with higher rates and load-to-truck ratios, are signs that "We are leaving the freight recession behind in the rearview mirror," said Mark Montague, DAT industry pricing analyst.
(Vans are regular containers on trailers. Reefers are refrigerated containers. Flatbeds are open, such as trucks carrying logs or machinery. Vans make up 70 percent of road freight.)
See spot climb
Spot truckload freight availability in May 2017 reached its highest point since September 2015. Spot is freight that must be moved, usually within a day or two, that is not part of a contract. The price is fixed on the spot just for that one load. Most shippers (for example Costco) have contracts with freight companies (such as Knight-Swift) to truck their goods at the same rate for a year, plus or minus a fuel surcharge.
Spot freight is a leading indicator of the strength of the economy, because goods needs shipping when they are parts, and again when they are finished products, Peggy Dorf, a market analyst at DAT, explained to the Business Tribune.
Spot freight availability increased 7.3 percent compared to April 2017 and 63 percent year over year, according to DAT.
"When freight goes up there's usually a corresponding change in the economy, because parts have to arrive and the items being imported have to get to their destination."
She says freight also had a boost when fracking became America's number one way to get oil and gas 10 years ago. When fossil fuel prices dropped, "It tailed off, now it's starting to come back on."
Keep on fracking
The sand and chemicals for fracking usually travel by rail cars, but other things go out on trucks. "Just drilling generates activity," says Dorf.
She also credits the increase in housing starts since the housing slump of 2008-2009 as boosting trucking. "Now housings starts are up because building materials have to be delivered, all that lumber and concrete."
Only 25 percent of truck freight is spot. Seventy five percent of freight is shipped under contract.
Van and refrigerated freight activity led the way in May, with van volume gaining 16 percent compared to April and reefer freight volume up 19 percent. This indicates higher demand for trucks to move dry goods and agricultural products before the start of the summer, Montague said. Flatbed activity slipped 2.4 percent month over month, in line with seasonal norms.
Total freight volumes beat prior-year comparisons for the tenth consecutive month. Compared to May 2016, van load availability jumped 86 percent, reefers increased 87 percent, and flatbeds added 56 percent. And spot rates were higher for all three equipment types.
California road trip
"California produces 70 percent of the fruit and vegetables consumed in the U.S. We get a lot from Mexico and South America in the off season, and from Florida early in the year."
Spot rates typically rise in June when produce from California hits the road. Fruit and vegetable rates tend to be spot because ripeness is unpredictable.
"You can't wait on raspberries," says Dorf.
Carriers might have "dry" trailers and "reefers" (refrigerated), but they usually prefer the latter because they can charge more.
This year will be a bumper year for cherries that California brought over. Cherry starts were delayed a few weeks by rain, but they will soon be ripe and ready. "Texas has become very big, in the Rio Grande, near Laredo. There's produce on both sides. It all puts upward pressure on the process, starting with reefer trucks. It happens every year, but this year the pressure is greater than usual."
Another factor in the trucking industry is regulation changes. As of December 18, 2017, trucks must have electronic logging devices in the cab that monitors activity. This is to limit drivers from driving more than 11 hours out of 24. They must take a 30-minute break in the first eight hours. And they can't be on duty for more than 14 hours in 24.
Many of the big freight firms have already installed the devices. "They took a productivity hit," says Dorf. Smaller firms were resisting. Their case was turned down by the Supreme Court and now they will have to conform and adapt.
"It'll have the most impact on trips of a certain distance, where you might try to go 450 to 600 miles in a day. That might spill over into a second day."
Grey area ahead
Trucking is like construction, in that many of the drivers are over 50 and young people are not attracted to the industry.
Transportation managers at shippers (such as Costco) like to have limited number of fleet to manage. When they are maxed out they got to a broker or third party logistics provider (3PL) like C.H. Robinson or Landstar System and pay them to find rides and sort out the details.
As for driverless trucks, including those in which trucks ride in robotic convoys with drivers just in case, Dorf says the industry is preparing.
"There will be some incremental changes with the electronic logging devices. You can use the technology in different ways, to track the truck or the freight. It gives the supply chain managers more control."
Train freight is also taking to the tagging devices, which will prevent box cars being invisible to the tracking system when they sit in sidings.
"I think they'd welcome an operation less dependent on drivers," Dorf says of the trucking world.
"You can buy trucks, but it's hard to keep professional, safe, reliable drivers around. And it doesn't seem to be a job young people gravitate to."
She suggests drivers might even get paid more. Companies are already trying to make the job more attractive by scheduling shorter trips so drivers aren't away from their families for as long. They will limit a trip to 250 miles, with a driver handing off one trailer and bringing a different on home. All this is easier to do with cloud-based technology and tracking systems.
With construction, when there's a labor shortage you build more slowly.
"With trucking you have delivery commitments. You can't deliver more slowly."