State of Transportation Key Topic at TMSA Seminar in Chicago

Part 1 of a 3-Part Series: Recap of the TMSA Connections Seminar in Chicago

More than 40 marketing and sales professionals in transportation and logistics pre-registered for the TMSA Connections Seminar, held last Thursday in Chicagoland. A significant amount of time was devoted to discussion around these two questions involving the state of the marketplace: What are you hearing from shippers? And what are the biggest challenges and opportunities facing transportation companies in serving their customers?

What are you hearing from shippers?
TMSA’s CEO Brian Everett led conversation around how demand patterns are shifting, technological advances are changing industry economics, and emerging competitors are challenging traditional business models. Most agreed that the over-the-road trucking market has ben gaining traction after a weak 2015. Everett referenced a recent A.T. Kearney analysis of Truckstop.com data (a TMSA member) showing spot rates for dry van shipments rising 10 percent in 2016, reversing much of 2015’s steep decline. Full truckload rates also overcame early weakness to close 2016 higher than 2015 levels, according to Morgan Stanley’s Full TL Index.

Shippers are seeing their relationship evolve through advanced technology. These technologies and improved processes are reshaping business models and redefining relationships between shippers and carriers. Driving more efficiencies are such methods as multiple-round annual bidding, improved sourcing and geolocation platforms, and more collaboration and detailed feedback between shippers and carriers/providers. These approaches are helping shippers to find the best combination of common, dedicated, and brokerage-based providers.

Capacity shrinkage in 2016 rolled into the first quarter of 2017, thanks to stronger demand and  improved business conditions for carriers. Trucking companies also took advantage of an improving supply-demand balance to accomplish rate increases. Another catalyst for increased rates has been the concern around the potential impact of electronic logging devices (ELDs) that track driver hours for compliance with regulatory limits. While some estimate ELDs would significantly reduce capacity, others said during the seminar it would likely be around 2-4%.

What are the biggest challenges and opportunities facing transportation companies?
To answer this question, one must look at economic drivers and key indicators that help to understand the current state of the industry.

E-commerce continues to turn parcel delivery into the fastest-growing logistics sector. In 2016, parcel volume increased 6% as online retailers flooded delivery networks with small packages using last-mile strategies and home delivery. Volumes rose 3% in early 2017, indicating no end to this growth is in sight. Forecasters predict parcel shipping revenues to climb to $93 billion by 2019 from $78 billion in 2015. Consistently rising volumes in packages could likely drive three emerging trends in the next few years:

1. Regionally oriented DCs will continue to emerge as part of advanced networks as retailers offer same-day delivery in more densely-populated areas.
2. Redesigned distribution networks will require new trucking routs and will force new route configurations.
3. Because last-mile capabilities are essential to accomplish same-day deliveries, carriers will continue to build local route densities needed to provide last-mile services profitably.

What about the current state of the intermodal and international transportation industry? Everett cited key statistics provided recently by the Intermodal Association of North America (IANA), a TMSA member. These stats are provided in the Intermodal Market Trends and Statistics Report (2017 Q2 Report):

• Intermodal markets stabilized in June, growing 4.5% in Q2. This was the strongest improvement in nearly three years.
• International intermodal emerged as the primary driver of growth, rising 5.6%. This outcome was even more significant based on the 9.3 % decrease in the international market in Q2 2016.
• Domestic containers grew by 3.2%, almost three times the increase of Q1. The Southwest region posted the largest gain, likely indicating an increase in transloading.
• Trailers managed a 3.9% improvement in the second quarter, after contracting by 28.6% in Q2 2016. This result likely has more to do with weak comparisons than strength in the trailer market.
• Canada displayed the most robust growth. International gained 13.2% and domestic improved by 6.8%. Nearly 25.0% of international traffic originates in Canada thus having a significant impact on international intermodal volumes.
• Truckload volume was up in Q2, mostly in the shorthaul and specialty trailer markets. The utilization rate hovered near 99%, while the driver supply remained nearly flat.

More market intelligence from the TMSA Connections Seminar in Chicago last week will be shared in a 3-part series of the 2017 TMSA Connections Seminar Recap.