FREIGHT RATES HIT RECORD HIGHS
Friday, June 30, was the end of the second quarter, and was also the start of the July 4th holiday weekend. This combination boosted demand, as shippers wanted to move freight out the door before the end of June. Trucks were also more scarce than usual, because so many truck drivers wanted to be home for a four-day weekend that included the Tuesday holiday. Because of this, the national average load-to-truck ratio hit a one-week record of 6.4 loads per truck. That’s the highest it’s been since at least 2010, maybe longer. The imbalance between demand and capacity increased pressure on van rates, which rose on 74 of the top 100 van lanes in the US. Rates continued to trend up sharply that week, which might reflect just how much more shippers had to pay to get their loads moved before July 4th.
In the past, rates have started to decline after Independence Day, so the market may quiet down in the next couple of weeks. But, with online retailers like Amazon offering special deals and one-day sales on merchandise and shipping (Amazon Prime Day), along with other retailers who have announced sales events, there could be a surge in van loads moving from one distribution center to another, prepping for an expected boost in consumer spending. Freight rates were recently up out of Allentown, PA, but the Southeast was the hot spot for van freight in June. Outbound rates in Memphis were up 14% for the month. Atlanta and Charlotte prices were also up by double-digit percentage points.
Most lane rates were up in June, as well, with some making notable jumps. Atlanta to Philadelphia added another 17¢ to a new high of $2.95 per mile, and Atlanta to Charlotte was a strong regional lane, up 16¢ to $2.85 per mile. The return trip also paid better. For the Allentown to Boston lane, rates were up 18¢ to an average of $3.44 per mile. That’s high, even when you consider how bad the options are coming back from Boston. Lanes out of Stockton, CA rebounded after weather hampered shipments the week before. Rates on that lane to Seattle rose 22¢ to an average of $2.85 per mile. While demand and rates are still strong out of Atlanta, not all lanes were up – the Atlanta to Columbus lane dipped 17¢ to $2.23 per mile in June.
ELECTRONIC LOGS ARE COMING
I think that most brokers and shippers don’t realize what a huge impact Electronic Logging Devices (ELDs) will have on their business, starting only five months from now. Large fleets have adopted ELDs already, but the smaller fleets and owner operators will put this off. That’s all going to end on December 18, when the ELD mandate goes into effect. But, this is actually a fantastic opportunity for freight brokers, especially if they have a roster of reliable carriers, and a great opportunity to turn the tables on all those “just in time” people who wait until the last moment to order merchandise so they don’t have a lot of extra inventory on hand. Shippers will need brokers more than ever, because it is going to get harder for them to find trucks on their own.
ELDs will cause a lack of flexibility in hours of service for drivers, so trucks can’t always move as far in any given day. That means less capacity will be available when they need it. Longer hauls will be less desirable, and hauls of 500 or more miles will not be able to make next-day delivery commitments. Two of the main reasons are parking and detention. With parking, drivers won’t be able to fudge their logs, so they’ll be more likely to shut down early to find parking before they run out of hours, and in regard to detention, any delay at the loading dock will jeopardize the next appointment. This costs the carrier even more when the drivers’ hours can’t be extended.
Drivers and owner operators do manipulate paper logs now, usually to gain a little extra flexibility. They want to pick up and deliver on time, and they also want to make more money. They’re not dishonest, but if they’re in danger of missing a truck payment, they’ll be tempted to cut a few corners on the logbook and run more miles-per-day. Once the ELDs are installed, there will be no more secrets. Electronic logs (at least at this point) can’t be altered. Those same drivers will not be able to make-up the time, so they have no choice but to raise their rates. It’s the only way for them to make more money in a given day.
On the customer side, brokers can expect to get a lot more power-only and team loads from shippers. The largest fleets have been placing trailers at customer sites for the past few years, and big shippers have been buying and positioning trailers, too. Pretty soon, they’ll be asking you to find trucks for “power-only” moves (no trailer required). This is great work for owner operators, because it’s so time-efficient. If you have customers who can set up drop-and-hook operations, you should be able to get them trucks at competitive rates. You may think of a 500-mile haul as a one-day trip, but starting on December 18, you won’t be able to guarantee next-day delivery on a 500-mile run unless you hire team drivers. Actually, “guarantee” is already too strong, and this applies to almost any load with strict appointment times.
So, how can brokers win in the new ELD environment? Set customers’ expectations and work with them to price and schedule freight moves that will work with ELDs. Find out if the shipper or receiver can offer flexible appointment times and/or authorize overnight parking. Learn everything you can about every load, and communicate openly and honestly with carriers. This is always good business practice, but it will be especially important when you work with carriers who are new to ELDs. Build relationships with carriers now, as many of them value loyalty over rates.
This will be a time of terrific opportunity and plenty of freight. Shippers will be anxiously-seeking new dedicated carriers and new brokers who have access to reliable carriers. Brokers who have established relationships with carriers now will benefit the most. The broker who can bring a truck to the dock will be the one who is chosen to provide the service. Like it or not, ELDs are coming. Embrace the change and find new and profitable ways to make them work for you and your operation.
If you have any comments or questions, or want help with your trucking business, NTA is here for you. Call (562) 279-0557 or visit www.ntassoc.com today. And, as always, until next month, “Drive Safe – Drive Smart!”