INDIANAPOLIS, Ind. — The three most important things fleet executives should be monitoring are the economy, freight growth and the re-regulation of the trucking industry, FTR president Eric Starks explained during the industry forecaster’s State of Freight Webinar today.
The economy seems strong, with US GDP growing at a modest 2.3% but the goods-producing sector growing at nearly 6%, Starks pointed out. This contributes to strengthening freight volumes, which could place further pressure on capacity and an acceleration of rates.
“In the near-time, the risks continue to be on the upside,” Starks said. “In general, things continue to be looking relatively healthy for the freight markets.”
Spot market rates seem to be leveling after a period of sharp growth, which is usually followed by increases to contract rates, Starks noted.
“I think we’re in that point right now. The spot market is settling down and contract rates are starting to move higher,” he said.
However, FTR continues to sound alarms about the re-regulation of the trucking industry and the regulatory drag caused by an influx of new rules that are currently in the works. The impending legislation could make it more difficult for carriers to hire drivers while at the same time necessitating the hiring of more, because of productivity losses such regulations will incur.
“There are a large number of regulations coming into play that we anticipate to happen between 2016 and 2018,” Starks said. “We’re seeing a major run-up within this environment that would suggest it will be very difficult to hire drivers, or we’ll see losses in productivity within the industry so they’re going to have to hire new drivers. It’s going to be a problem for some time.”
Another trend FTR has noted is the increasing collaboration that is necessary between shippers and carriers, again in light of productivity-hindering regulations.
“Shippers are going to have to work with truck carriers to create more capacity, to free up drivers and equipment,” Starks said. “That’s the real area where we could see some productivity enhancements.”
If shippers and carriers were hoping the arrival of a broader selection of natural gas trucks and a growing fuelling network would be their saviour, they better think again, Starks noted.
“There has been some increase in sales of natural gas trucks, but it’s still less than 2% of all trucks sold within the US and Canada,” Starks said. “So the market is not taking off like many people had hoped and at this point in time, the cost situation (of purchasing natural gas trucks) does not bear out the ability for people to go out and buy this equipment – it’s just too expensive.”
Starks said fleet executives should be keeping a watchful eye on several key issues going forward. One is global markets, such as China, which has seen its GDP growth go from double digits to closer to 7%. GDP growth in China of 5% or less would reflect a worrying recession, he added.
“We have to pay attention to what happens within the global economy, because we’re much more connected today than we ever were,” he said.
Extreme weather, while it can’t be controlled, is another area fleets need to do better at planning for, Starks said. “Our industry doesn’t do a good job of planning for weather.”
Fleet should also be aware of legislation being introduced in California by CARB, as it often has an impact beyond California’s borders. “We have to pay attention to what California is doing because it tends to move its way through the broader market,” he said.
In closing, Starks offered three tips on how fleets can improve their prospects for success:
Measure: “Measure everything you can. Track and understand your internal data and external market data so you can identify trends and issues within your system you can correct and change quickly,” he said.
Communicate: Fleets struggle to communicate within their organizations and with their customers, Starks said. “It’s very difficult for us to communicate effectively…we have to figure out a way to communicate changes within the market.”
Be flexible: “Have a plan in place, so if market conditions start to change, you have a clear direction of what you want to do to be able to move in that direction,” Starks advised.
This month’s State of Freight Webinar touched on several issues FTR will be discussing in more detail at its annual conference, to be held in Indianapolis, Ind. Sept. 9-11. More info on the conference can be found at www.FTRConference.com.