Transfix Take: Weekly Market Update (Oct. 5)

Q4 Off to Strong Start, YoY Numbers Soar

The start of 2020’s fourth quarter is not disappointing, with all numbers pointing to a very strong end to the year, following our trend predictions last week.

“All experts seem to be on the same page with the fact that demand will stay high and capacity will remain tight, no matter what 2020 challenges remain,” Justin Maze, Transfix’s senior carrier account manager, says.

“Transfix has seen a spike in long hauls, which represents the need for retailers to restock, as they struggle with inventory levels in a crucial part of the year. We are paying particular attention to two areas:

1. Reefer rejection levels, which are close to 50%. This represents extreme tightness, as we go into reefer season. And as temperatures lower, more freight will have to be shifted to reefer equipment to protect it from freezing.
2. CPG and retail customer volumes. These customers will have the greatest spikes in volume in Q4, and Transfix is adjusting to meet shippers’ changing needs.”

Accepted freight tender volumes are running up 16.5% year-over-year. “October should give us a strong indication of demand through the end of year,” Andrew Cox writes on Freightwaves. “We still believe the rest of the year is bright for the freight market. Retail inventories are down 12% year-over-year, while sales are up 11%. The possibility of another round of stimulus before the election would aid this argument. While consumer confidence has faltered, spending is remaining strong, given the economic backdrop.”

The 2020 Outbound Tender Volume Index (OTVI) made its Labor Day dip a distant memory, showing stark comparisons with 2019 and 2018. (In the graph below, 2020 is blue, 2019 is orange, and 2018 is green.)

National truckload capacity remains tight, as the Outbound Tender Reject Index (OTRI), a measure of relative capacity, jumped 15 basis points during the past week and sits at 25.66%. This increase follows back-to-back weeks where rejection rates flattened after peaking at 26.68% on Sept. 9, still soaring above the past two years. (In the graph below, 2020 is blue, 2019 is green, and 2018 is orange.)

“Ultimately, capacity hasn’t substantially loosened, and the elevated rejections keep upward pressure on rates, as we begin the fourth quarter,” Cox writes. “Rejection rates in three of the six largest freight markets are outpacing the national average for a second week in a row. Although rejection rates have slowed since Labor Day, carriers are still rejecting more than enough contracted freight to keep spot rates high.”

Contrary to seasonal trends in 2018 and 2019, capacity did not loosen in September, and October should take us on another unusual ride — the hallmark of 2020.

Mini-Bids Drive Shippers to Digital Freight

With rates up and capacity down, many U.S. shippers are moving in the direction of shorter, focused “mini-bids” with carrier partners, William B. Cassidy reports on JOC.com. The shift is “putting more emphasis on the real-time collection of data on carrier performance and changing shipping patterns and rapid data analysis, shippers and analysts tell JOC.com. That’s accelerating investment in technology that can provide analytical power and clarity.”

Shorter bids translate to more bids, necessitating more accurate data and forecasting. Traditional manual bidding processes are just not cutting it anymore. “Shippers are asking how to get out of this manual process, how do we partner better with carriers,” Carly West, director analyst at Gartner, said.

“The need created by COVID-19 and the market conditions is making digital freight mainstream,” said Bart De Muynck, vice president of research at Gartner and a supply chain specialist. “Necessity is the mother of digital disruption. It’s changed everything from how people procure freight to how they use visibility data and how many digital documents they’re using, like digital bills of lading and digital identification used at warehouse gates.”

Shippers are turning to third-party logistics providers (3PLs) for help navigating this “new normal,” in an effort to transition bidding and contracting away from paper and spreadsheets to digitized freight networks, such as those offered by Transfix.

“Digital brokerages can optimize bids in a much more agile way, compared with traditional models, for two reasons,” Drew McElroy, Transfix’s co-founder and chairman, says. “First, platforms such as ours are founded on the philosophical underpinning of data, on knowing where everything is based on freight market movements, which are further informed by deep carrier partnerships that give us on-the-ground feedback. This enables our ability to both respond accurately with pricing based on marketing conditions and to execute on our commitments. Second, on the demand side, because of our technology integrations with shippers, we can run a seamless bid process that takes into consideration both historical demand data and current conditions to provide instant pricing in a tiny fraction of the time of traditional RFP processes.”

De Muynck and West said broader collaborative networks that include shippers, carriers and 3PLs are where the greatest gains in efficiency, productivity and cost savings will be made.

With the uncertainty and volatility surrounding the US economic recovery, shippers need a partner that can help them adapt and excel — no matter the circumstance. Shippers turn to Transfix for our leading technology and reliable carrier network.  As volumes drive higher, we are here to help: Learn more about our Core Carrier program and Dynamic Lane Rates. As part of our ongoing market coverage, we’ll continue to provide breaking news, resources and insight into emerging trends and the pandemic’s impact on the transportation industry.