Freight pros think we’ve hit the floor in terms of declining demand, but they also think we’ll be down here a while before the market climbs back to normal levels.
It has been a long slide to the bottom in terms of demand for freight capacity, but it looks like we may have hit the low point of this extended lull.
“From a freight demand perspective, there are indications of an improving trend, but much is still dependent on consumer demand and inflationary pressure,” said Paul Bowman, the senior vice president of Sales for U.S. Xpress, who has been working the freight markets and collaborating on customer needs for 30 years. “We expect it will be post-2023 before we see a meaningful shift in that supply/demand dynamic.”
But there’s a lot to do in the meantime, for both shippers and carriers, and focusing now on those fundamentals will pay off when the market rebounds.
Strong foundations. Regardless of market conditions, some things are always at the top of the to-do list. Improving the driver experience and emphasizing driver safety, retention, and training ultimately lead to a higher level of service and stronger customer relationships. “We are all watching the market, but there are things we are always doing regardless of conditions,” Paul said. “Serving customers and giving our drivers a great experience to keep them safe and driving for our team is always in season.”
Durable connections. For more than 30 consecutive weeks since January 2023, the Federal Motor Carrier Association (FMCSA) has seen net deactivations in carrier registrations, which means more carriers have deactivated than activated in that period. As carriers fall out of the market, more shippers are choosing to stick with carriers that will be there through the highs and the lows. “The longer we stay at the bottom of this freight cycle, the more carrier exits we’ll see,” said Lee Thigpen, vice president of Revenue Management, who has two decades of industry experience.
Watching costs. One important factor in the current state of the freight market is the long-term inflation picture. Yes, inflation has cooled off a bit recently, but the costs of moving freight have increased dramatically compared to few years ago. The average consumer is paying 18% more for goods and services in 2023 versus 2019. Industry costs include a 54% increase in trailer prices and a 17% increase in tractor prices during the same period. All of that means shippers and carriers must strike a delicate balance ahead of the busy bid season. “Normally, summer is the slowest season for RFPs, and they pick back up in September,” Lee said. “We’re preparing for bid season by finding creative ways to support our customers efficiently and with a high level of service despite the impact of inflation.”