Has Trucking Peaked? According to analyst it may have.

Trucking may have peaked with trucking capacity, consumer purchasing, changing inventory levels, high rates and contract freight rejections all applying pressure.

Has Trucking Peaked? – Data from the CSCMP’s Logistic Managers Index shows that between May 2020 and February, inventory costs, warehouse prices and transportation prices were between 27 to 39 points higher than the break-even number.

Data from the Council of Supply Chain Management Professionals’ Logistic Managers Index (CSCMP) shows that between May 2020 and February, inventory costs, warehouse prices and transportation prices were between 27 to 39 points higher than the break-even number.

This index is a good indicator of the entire supply chain market, said Noel Perry, a transportation economist from Transportation Futures.

As far as trucking specifically is concerned, since the third quarter of 2020, spot truck rates have risen above the five-year average between 2015 and 2019, according to Brent Hutto, chief relationship officer at Truckstop.com.

The increase has been driven by a manufacturing boom during the COVID-19 pandemic, with steady household disposal income that consumers shifted from service-based purchasing (like travel) to hard goods that move by truck. But that’s not likely to continue at the same pace for the rest of the year.

Perry and Hutto agreed that it looks like trucking has reached its peak capacity. Which, Perry stressed, doesn’t mean it’s not going to be “spectacular year, just that it won’t be any more spectacular than it already is, he said.

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“These things happen when you have strong demand and weak supply,’’ explained Perry. “Capacity peaks happen when there is an acceleration and the industry can not keep pace.”

Why is pressure so tight on trucking? A cumulation of intertwining factors.

Has Trucking Peaked? According to analyst trucking may have peaked with trucking capacity, consumer purchasing, changing inventory levels, high rates and contract freight rejections all applying pressure.

1. Tight Capacity

With about 40-percent fewer drivers graduating from commercial driving schools during the pandemic, and a further 50,000 drivers lost through the Drug and Alcohol Clearinghouse, Hutto said this has put pressure on an already tight market.

2. Consumer Purchasing

During the pandemic, consumers were purchasing more hard goods in comparison to service-based goods, and shifting to online sales. Up to 31% of consumers were purchasing online in the U.S., according to Hutto.

“Every goods purchase hits a truck, and that creates a lot more load volumes in the market, which creates a tightness in the marketplace,” he said.

Has Trucking Peaked? According to analyst trucking may have peaked with trucking capacity, consumer purchasing, changing inventory levels, high rates and contract freight rejections all applying pressure.

3. Changing Inventory Levels

During the pandemic, many manufacturers were caught short on product as consumer spending habits changed. This led to manufacturers needing to warehouse more things because they didn’t want to get caught short on product again. In turn, businesses were warehousing more items, which lead to warehouse capacity being at an all-time low.

4. High Rates

Rates were at an all-time high going into this year, while traditionally they go down in November in December. In typical times, the low rate meant that the negotiation for contract freight and some spot freight tended to be at about 1 percent to 2 percent. But in 2020, the average shipper had a price increase of between 8 percent and 15 percent, according to Hutto.

“That is a remarkable increase when it comes to the market,” Hutto said. “It’s another indicator of tightness because the carrier had the advantage in negotiating those contracts.”

5. Contract Freight Rejections

One in four loads are being rejected electronically, according to FreightWaves data referenced by Hutto. That’s a big number, he said.

Additional factors include growing confidence in the economy and more freight coming as service purchasing rebounds.