The deeper truth behind this title? More than 18 months out from the onset of the COVID-19 pandemic, there’s plenty of good news and bad news to be found. Amidst it all, while the world of freight takes meaningful steps towards a new technology-centered approach to finding and booking freight, there’s also a scarcity in semiconductor computer chips needed to facilitate easier movement of the vehicle supply chain, which is impacting the entire economy in a major way.
But what does this all mean for owner-operators and small carriers who rely on the industry for livelihood and business success?
Discussing the ups and the downs of the freight market is critical for understanding the best way to navigate the industry, but on a deeper level, it’s the key to surviving an ever-changing sector.
Trucking Industry 2021: Facing a Slow Supply Chain
Throughout 2021, the industry continues to experience a rather sluggish supply chain, which can be unpredictable for carriers and owner-operators alike. The global supply chain crisis is not going to end any time in the near future, but the pandemic is not the only cause of supply chain issues. Thinking of freight challenges as a one-time problem caused by the pandemic misses the larger picture.
Oren Zaslansky, founder and CEO of Flock Freight shared that there are currently many situations in which “there may be 10 truckloads ready to go but only one driver is available, and one-third of those trucks’ loads aren’t close to full. That means the customer is ‘paying to ship air.’” but the pandemic has certainly illuminated and exacerbated this issue. Beyond “shipping air,” the scheduling practices used by shippers, especially in light of supply chain disruptions, contribute to the underutilization of long-haul drivers; this issue feeds into capacity challenges.
With slowed production at manufacturing and processing plants, plus a short supply of refrigerated trucks or “reefers” available, it’s no wonder the supply chain has been affected.
Increased Cost of Raw Materials
In addition to a stalled supply chain, raw materials have increased in price and remained high. This means equipment prices are high, which means prices are holding firm at top dollar across the board, creating a kind of unnatural inflation.
Eventually, if prices remain high, this will cut into sales at some point, according to the laws of supply and demand. Semiconductor chips are the top cause of many supply chain jams, which have limited Class 8 vehicle production, and there’s been a surge in steel prices that makes the costs of vehicles, other heavy equipment, and many related goods that serve as indicators for the economy quite high.
While this isn’t necessarily impacting the world of freight transport just yet, it could. While carriers and owner-operators still have the power to negotiate pretty good rates, the increased cost of raw materials could mean bad news down the line.
High costs of raw materials are impacting original equipment manufacturers (OEMs), hurting their businesses and affecting their profits. Manufacturers are also facing worker shortages, which can hurt demand.
When combined with supply chain issues, steep costs of raw materials could be a trend that impacts small carriers in the future.
A Driver Shortage
As it stands, experts estimate that the industry needs an additional 80,000 qualified drivers to address major issues in the supply chain, all while American workers are looking for higher pay, more flexibility, and improved working conditions. Those looking to address these concerns by working for large, asset-based carriers aren’t finding the solution there, which means turnover is high.
Due to the pandemic, there were fewer training opportunities, and the pursuit of other opportunities kept some drivers from returning to the road amidst the deadly spread of the disease.
Additionally, the Federal Motor Carrier Safety Administration (FMCSA) started its Drug and Alcohol Clearinghouse in January of 2020, in an attempt to remove dangerous drivers who should not be on the road. By the time the program had been in action for over a year, the Drug and Alcohol Clearinghouse had removed tens of thousands of drivers for drug and alcohol violations by the start of 2021.
A Steady Supply of Shipments
One of the most significant trends from the past year is the increase in consumer online shopping, which has led to a steady and consistent need for more carriers. COVID-19 has altered the way that consumers shop. After growing by nearly 20 percent in 2020, eCommerce sales still grew even as stay-at-home orders and social distancing eased in 2021, with an expected growth in 2021 of 8.7 percent.
Online sales stayed consistent through the year after record-breaking holiday shopping and returns in late 2020 and early 2021. eCommerce holiday sales rose by an astonishing 32.5 percent in 2020, and they were expected to continue to climb even higher in 2021. Throughout this busy holiday time and well into 2021, vaccine rollouts also kept carriers busy until July when the rollout slowed.
The Impact of Government Spending
Government spending can have a major impact on the freight transport industry. Unemployment and stimulus money in 2021 increased consumption and therefore freight volumes while also allowing drivers to remain at home, deepening the driver shortage while increasing the need for more trucks on the road.
Additionally, with the new, bold infrastructure bill waiting in the wings, we can expect to see a slew of construction projects to improve roads, bridges, and buildings. The bipartisan infrastructure bill includes an allocation of $110 billion in funding dedicated to repairing roads and bridges. This funding, which is the largest federal investment in bridge maintenance since the original expansion of the national interstate system, will go primarily towards repairing economically critical bridges; however, it will also be used to repair thousands of smaller bridges throughout the country. This legislation is making strides to reduce traffic fatalities as well, and will include the first Safe Streets and Roads for all programs. In the short-term, road and bridge maintenance may cause traffic delays so carriers will have to take road projects into account when planning routes. Long-term, the government’s investment in infrastructural improvements and the reduction of traffic fatalities is good news for carriers. Well-maintained roads and bridges means less wear and tear on trucks, and safer driving conditions.
Increased Contract and Spot Rates
Fewer drivers, increased freight demand, and reduced capacity are a recipe for higher contract rates, which were anticipated to grow from 8 percent to 15 percent by the end of 2021. In particular, spot rates were projected to climb upwards until the fall, when these rates will ease again in preparation for the peak holiday season.
Transparency and Technology Amidst Shifting Trucking Industry Trends
One of the major trends that those in the freight transport industry are driving? More transparency.
From freight rates to tracking information and more, technology is playing a major role in the future of the freight industry, enhancing just how transparent it can be. Among this increased adoption of digital transformation, new technologies are emerging to make the industry simpler and more clear-cut to protect small carriers and owner-operators. These trends include:
Drivers value transparency. At Xpress Technologies, transparency is at the core of how we operate — we want to be as open and honest as possible when offering freight to carriers. Whether you book through the Xpress Technologies App or call to speak directly to a broker, you can trust that the rates you’re seeing on the app or receiving from brokers truly reflect the market. Xpress Technologies is following industry trends of going paperless by offering eLogs, online scheduling, and access to freight through our state-of-the-art app that optimizes freight suggestions based on carrier preferences.
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