The past year has been characterized by plentiful capacity and rock-bottom rates. While the current freight recession has continued longer than initially expected, industry experts are anticipating a significant market shift in the new year.
“Having navigated through a cyclical trough for the ages, both spot and contract truckload linehaul rates are now poised to break materially higher in 2024,” Flock Freight Chief Operating Officer Chris Pickett said.
It’s a well-known — and often begrudgingly accepted — reality that neither shippers nor carriers can hold onto pricing power for too long. The cyclical nature of the transportation industry requires regular power shifts; shippers should begin preparing for the next pendulum swing now.
“Anticipate the acceleration of truckload spot linehaul rates, breaking into year-over-year inflationary territory as early as Q1 2024, and to surge 30-40 plus % throughout 2024 and into 2025,” Pickett said. “This surge will be driven primarily by the ongoing exit of surplus capacity from the market, but also supported by continued post-COVID strength in consumer spending on durable and nondurable goods.”
This market shift is expected to put pressure on routing guides sooner rather than later. In fact, shippers should expect to begin feeling the impact within the next few months.
“Brace for escalating pressures on contract routing guides by early Q2 next year, leading to potential erosion in both primary tender acceptance rates and overall service levels,” Pickett said.
While navigating shifting market conditions can be stressful, shippers that focus their attention on increasing their own operational efficiency and cost effectiveness can thrive during this time. The key is to take stock — and make any necessary adjustments — early.
Make data-informed decisions
In order to respond to the market in real time, shippers need to know what is happening around them. While this concept seems simple, many companies rely on historical data to predict future conditions, making it difficult to understand what is actually happening in the market today.
Shippers can utilize high-frequency data — like that housed in FreightWaves SONAR — to step away from the age-old guessing game and get a clear view of the market. This knowledge can empower them to respond to the market in real time instead of reacting after their bottom lines take a hit.
Stop paying to ship air
Once a shipment gets too large to move via less-than-truckload, shippers tend to send it out with their next available truckload partner. Freight is loaded onto trailers and moved as soon as possible, with little regard given to the empty space left on the trailer. In fact, almost half of the trucks traveling down the highway are running at half capacity, which means one-fourth of all available truck space is wasted on a daily basis.
Because this model has been the status quo for so long, shippers are accustomed to paying for empty, unused space in truckload trailers. This costly reality is not their only option anymore, though.
Flock Freight’s shared truckload solution, FlockDirect, uses real-time data to pool freight for multiple customers. The solution effectively dismantles the physical hub-and-spoke constraints that have defined the supply chain for more than a century.
By utilizing FlockDirect, shippers can realize up to 20% cost savings over full truckload rates. In fact, Flock saved businesses tens of millions of dollars in shipping costs against the full truckload alternative in 2022.
Invest in just-in-time supply chains
Just-in-time supply chains are designed to handle unexpected variable demand without having to worry about the risks and costs of overstocking or understocking. Historically, however, operating under a just-in-time model required shippers to develop complex and fragile inventory management models in order to avoid shortages or sky-high transportation costs.
With FlockDirect, shippers don’t have to wait for a critical mass of product to accrue before accessing a cost-effective way of shipping their products. This allows shippers the opportunity to employ an on-demand model to handle market volatility.
At the highest level, FlockDirect addresses rampant industry waste by offering a terminal-free shipping option with truckload-level service without requiring shippers to pay for empty trailer space. Flock Freight accomplishes this by using its patented technology, powered by machine learning, to find and fill the empty space on trucks.
How FlockDirect works
At the point of quote, Flock’s patented technology analyzes dozens of data points to predict the poolability of the shipment.
Flock uses that individualized assessment to enable shippers to only pay for the space they need in a trailer, providing nuance and flexibility.
Once the shipment is ordered, Flock leverages real-time data and advanced network optimization algorithms to determine the most efficient way to move the shipment.
Flock’s technology handles all of the coordination complexities associated with pooling, ensuring on-time service and safety rates equivalent to truckload by using their data to model transit times, packing configurations and timing constraints.
Flock continues to optimize shipments all the way up until pickup, thereby taking advantage of all available lead time, giving them the best possible chance of pooling.
In short, Flock Freight’s innovative shared truckload solution has created a new shipping option that allows each individual shipper to pay less, while simultaneously helping drivers earn more and reducing the negative impact of trucking on the environment.
Some shippers — especially enterprise operations — have had difficulty utilizing shared truckload options due to historical inefficiencies in tracking pallet count and utilizing technologies. Flock Freight has created options specifically designed to assist these customers in visualizing pallet counts to reduce waste and has invested in a new TMS partnership with e2open and integrations with OTM and others to enable shippers to tap into the efficiencies and savings of using FlockDirect.
Ahead in 2024
Shippers do need to take action to prepare for next year’s market, but Pickett is optimistic about what is to come.
“As we look ahead to 2024, despite the ongoing supply-side challenges in the market, we see plenty of reasons to be optimistic,” Pickett said. “The market dynamics might be tough, but historical patterns indicate that this is a phase we’ve weathered many times before and it sets the stage for a strong rebound in the near future. The deeper the trough, the higher the next peak … for good or for worse.”
Flock Freight and FreightWaves recently teamed up to host a webinar — “How enterprise companies are using AI to drive cost efficiency within truckload programs” — to help shippers understand their modern options.
Click here to view the recording of the webinar.
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