Demand for shipping is stronger than ever and the holiday outlook promises more of the same. In fact, many carriers were so busy at the start of October they were turning down freight in record amounts (Logistics Management). A strong economy has increased demand for truckload shipping across the country, but the surge is squeezing capacity hard. According to FTR Transportation Intelligence, trucking conditions should continue to favor carriers throughout the holiday season (Truckinginfo).

Coal in Your Capacity Stockings

Trucking capacity is at its tightest in decades and definitely on shippers’ naughty list this year. Here’s what you can expect for the rest of 2018:

  1.  A Carrier’s Market

Carriers are rejecting loads and rates are rising after 20 years of a shipper’s market. Demand dipped slightly in August but has started to tighten again. Overall, spot rates are up 20 percent since this time last year, according to DAT trend lines (FTR). And according to Goldman Sachs, shippers should be prepared for this carrier’s market to become the new normal. One more surge is in store for the fourth quarter, followed by a softening in 2019, and rates should remain 12 percent higher for the long-term (FreightWaves).

The Shippers Conditions Index (SCI) shows an unfavorable environment for shippers this holiday season. This index, which factors all market conditions together, points to a shipper’s market when the reading rises above zero and a carrier’s market when it falls below. July’s SCI was -9.9 and is expected to remain negative throughout the holiday season.

  1. Full Truck Utilization

By some estimates, trucking capacity actually increased 4 percent since April due to an influx of new drivers (FreightWaves). Yet truck utilization is currently at 100 percent with a 10-year average of 94 percent. Demand likely won’t slow, but some relief may come by the end of the year through productivity improvements and new trucks on the road. New truck orders surged this year, but because of long lead times, they’re only starting to roll in this fall (FTR).

  1. Soaring Container Volume

Demand is up for container volume via the Port of Long Beach/Los Angeles, the largest container port in North America. Indices show that outbound loads were greater than inbound loads by more than 12 percent in September. Dry van rates from Los Angeles to Dallas have also increased by more than 30 percent. The pattern is likely due to professional retail buyers ordering goods to stock their store shelves ahead of the holidays, and who are now transporting the contents across the country by land. Together, these indicators point to a strong holiday season ahead (FreightWaves).

  1. Shortage of Drivers

Even with new hiring, the problem continues to limit capacity and increase pricing during the peak season. Carriers are hiring aggressively, but must compete with manufacturing and construction industries for talent in a very small labor market (BLS). The waiver for hours-of-service on some OTR agricultural commodities shipments also expired this past June. These drivers can no longer cover long distances without rest stops—which means more drivers may be needed for the same freight volumes, causing worry for shippers heading into the holiday season.

Good Cheer for Shippers Despite Tight Holiday Capacity

What’s on the nice list for shippers this year? Retail sales were up 5.9% year-over-year in May with strong sales predicted for the holiday season (FTR). According to the National Retail Federation, sales will easily surpass the average of 3.9 percent, although they probably won’t hit the 5.3 percent growth seen last year. Holiday retail spending should ring in between $717 billion and $720 billion during November and December alone (Reuters).

And, while Hurricane Florence devastated the Carolinas, spot market rates returned to normal levels in the region this month. According to DAT, Florence shouldn’t cause ripple effects across the country’s supply chains the way Harvey and Irma did last year (DAT). However, another hurricane, Hurricane Michael, made landfall in the Florida Panhandle on October 10th. It was the third-most powerful hurricane to ever make landfall in the U.S. mainland (CBS). As Hurricane Michael’s aftermath continues to affect the Southeast, it is important to take every safety precaution. With that said, it is likely the supply chain will suffer some potential complications, such as transportation providers struggling to meet the demand due to unavailable equipment, restricted access to facilities or lanes, and a shortage of drivers. Economic change is inevitable in any marketplace and Capstone has experience helping customers and carriers navigate challenges along the way.

Staying Merry and Bright Through the Holiday Capacity Surge

Whatever your shipping needs this holiday season, working with a trusted 3PL can give you access to carriers and options that can lighten your loads and your mood. Are you interested in understanding all the benefits of working with a 3PL? Connect with a Capstone representative to take full advantage of their planning expertise, carrier relationships, and 24x7x365 support.