Carriers are starting to reposition capacity out West, as volume and rates continue to rise quickly. The imports that have been the talk of the industry are quickly filling up warehouse capacity in the West and are beginning their journeys closer to their final destinations.
Last week brought back memories of 2020 with similar trends in capacity shifts and rate hikes. At this point, shippers can’t do much more to prepare for this other than to partner with strong solution providers. The Northeast and Midwest continue to be carrier-favored markets struggling with capacity. This could exacerbate freight conditions, especially with the Northeast still working through its own import backlog.
The South and Southeast remained more optimistic markets for shippers, and as a result, we did not see much change in capacity or rates. And while the Pacific Northwest may be a small market in terms of volume, it continued to turn heads last week with large capacity issues driving rates upward faster than anywhere else; this will only continue in the coming weeks.
This week marks the start of Q4 — officially known as Peak Season — and we expect to see freight markets continue to rise. Last year’s rates rose ~25% through Q3. We’ve been in an extremely heightened market for 14 months now, and the rise this year during the same quarter was just more than 5%, with shippers and carriers operating more efficiently in this “new normal.”
Efficiency going forward will need all stakeholders to come together to create new solutions. Many signs are pointing to a very volatile end of the year within supply chains. Congestion has only gotten worse, which disrupted truckload transportation even more last week and showed similar signs to last year’s West Coast domino effect. Congestion from Asian ports, U.S. ports, the transition of freight to warehouse space, rail capacity, truck capacity, manufacturing constraints, and so many other bottlenecks facing supply chains continue to get worse, and we expect they will bring rising costs through Q4.
We believe more freight will hit the spot market for expedited services, supporting an ever-changing network shippers are employing to move their freight around. Different modes of transportation, including air, and different ports are being used to bypass congestion points and ensure goods reach shelves.
Our eyes remain on the labor shortage and how much more this could affect supply chains in the coming months. More than the current driver shortage — which is unlikely to change any time soon — the labor shortage we are seeing concerns seasonal workers traditionally hired by supply-chain companies to support the holiday rush. Amazon, FedEx, and every warehouse and transportation provider that hires seasonal workers for the holiday volume spike have been unable to hire additional labor for months now, so where will holiday workers come from? This shortage may cause further disruption, as we continue to move through the backlog of freight.
The American Trucking Association’s (ATA) advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 0.5% in August, following a 1.1% decrease in July. The August index of 110.3 (2015=100) was down 0.5% year over year.
“August’s monthly gain, while small, was the first since March,” said ATA Chief Economist Bob Costello. “It is important to remember that ATA’s tonnage data is dominated by for-hire contract freight, with a very limited amount of spot market freight. I continue to believe that tonnage has not recovered to pre-pandemic levels for two main reasons: broader supply chain issues, like semiconductor shortages, as well as industry specific difficulties, including the driver shortage and lack of equipment.
“Despite some supply chain issues, demand remains strong for trucking services generally. Truckload carriers are operating fewer trucks than a year earlier, which makes it difficult to increase freight volumes significantly.”
The movement of freight is changing in every mode, as shippers do their best to keep up with record demand while fighting congestion at multiple points throughout the supply chain. Shippers who think forward, use data and think outside the proverbial box on solutions, while partnering with companies such as Transfix, will come out of this ongoing freight rally in a better position and well ahead of competitors. The one huge win through this pandemic has been speeding up the digital transformation of the transportation industry.
With the uncertainty and volatility surrounding the U.S. 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.