The first quarter is traditionally a quiet period in the trucking and logistics industry. After peak retail season ends, freight volumes stagnate until early spring when produce, home buying, lawn care and other seasonal economic stimulants kick in.
Slower winter months can be an ideal time for strategic planning and retooling your business to prepare for growth. During the past two years, however, the pandemic-driven freight market has bulldozed traditional seasonal patterns with a constant barrage of demand.
Motor carriers and freight brokers are moving at full speed in Q1 of 2022, but to steer clear of three major roadblocks ahead will require skill and possibly better technology to sustain momentum.
Tight Supply of Labor
Businesses of all types are experiencing labor shortages, but the pain is especially acute for professional drivers. The American Trucking Associations estimated the driver shortage reached a record high of 80,000 last year and predicts it could reach 160,000 by 2030.
The pandemic exacerbated the driver shortage by increasing freight demand and influencing many drivers to choose an early retirement. It also choked the pipeline of new entrants from driving schools.
Some relief may be on the way from the Drive-SAFE Act that was part of the transportation infrastructure bill signed into law this past November. As part of the law, the Federal Motor Carrier Safety Administration plans to roll out a new apprenticeship program that will allow younger drivers (18-20 years old) to earn a CDL and be trained by sponsoring motor carriers. Time will tell if the program makes a measurable difference.
Increase in Freight Demand
Motor carriers entered 2022 with pricing power, and demand continues to outpace supply in the pandemic-driven freight market.
Record growth in freight rates and volumes during Q4 last year continued into Q1 of 2022 across all freight sectors. The number of van truckloads posted in the spot market, for example, increased by 31.4% from December 2021 to January 2022, according to DAT Solutions.
ATA’s seasonally adjusted for-hire truck tonnage index reached 115.5 in January, an increase of 0.6 points from December and 1.3 points from the year before. The index is at the highest level since before the pandemic started in March 2020.
On the supply side, however, fleets are at a standstill after raising driver pay to record levels and tapping out reservoirs for equipment capacity. Many truck OEMs are backlogged on orders well into 2024 and trailer orders are extended through August and could reach into the fourth quarter, according to ACT Research.
FTR Intel’s active truck utilization index is hovering near 100 percent with seemingly no room to give. Nevertheless, fleets will need to dig deeper and find new ways to improve driver and asset utilization to meet growing customer demand.
Inflation Pressure
Although carriers and freight brokers have been riding a tidal wave of pricing power, inflation is crashing the party. January’s consumer-price index is up 7.5% from a year ago, accelerating from December’s 7% pace, and it has been above 5% for eight months straight.
The second-highest operating cost for motor carriers, diesel fuel, surpassed $4 per gallon for the first time since March 2014, according to the Department of Energy. Geopolitical events, like Russia’s invasion of Ukraine, have rattled energy markets and will likely push diesel prices higher for the foreseeable future.
Inflation is hitting the cost side of the ledger from all directions. Besides driver wages and fuel, office and shop employees are asking for more pay. Vendors, utilities and service providers are also raising rates. Operational expenses could soon be increasing faster than motor carriers and freight brokers can support with pricing increases, if they haven’t already.
Putting New Technology to Work
The unrelenting pace of business does not mean trucking and logistics companies have to delay plans to implement new technology that can make a difference right away.
Modern, next-generation technology can be implemented during busy periods. For instance, motor carriers and freight brokers can deploy an enterprise SaaS-based TMS to improve their operational speed and agility in as little as a few days, not weeks or months.
One of many advantages of using a SaaS-based system is that operational and financial data can be quickly imported using established integrations a TMS vendor has with complimentary SaaS-based applications such as ELDs, trailer tracking, and accounting software.
To help with capacity, driver productivity and retention, TMS systems with a full-featured driver mobile app can extend intelligent automation to all driver workflows. Drivers can capture delivery receipts, view their pay for upcoming loads, request time off, and perform other functions that improve fleet efficiency and give them more control over their work and earnings.
The enterprise grade SaaS-based Magnus TMS gives truckload, less-than-truckload carriers and logistics providers a fast and efficient conversion process to address industry and business-specific challenges today.
If you could benefit from using next-generation technology for dispatch and operations but don’t have time to pause your business, contact us today to schedule a quick demo at (877) 381-4632 or sales@magnustech.com
