Last January, we were still a nation struggling with COVID, not knowing how long the many effects to society and business would linger. Thankfully, things started to normalize a bit faster than our team at Momentum Transportation expected. Consumers began leaving home again for travel and leisure experiences versus goods consumption — leading to the demand for spot freight rates dropping faster than expected.
At the beginning of the year, we talked about two significant trends. The first one was the continued criticality of the shipper-carrier and supplier relationships, especially from our perspective at Momentum Transportation. At Momentum Transportation, an award-winning Landstar Logistics agent, we know that our customers reap significant benefits when we, as their transportation partner, maintain strong, closely-managed relationships with the drivers who move their freight. A solid, long-term relationship results in steady rates, — and often preferential access to capacity. This is especially true if your freight profile means you use heavy hauling companies for specialized equipment and product securement that are hard to find. A solid relationship also translates into more committed drivers who come to trust the regularity and consistency of the relationship and freight profile.
The second major trend for 2022 we cited was the ongoing driver shortage, a very familiar topic for many years now at Momentum Transportation and in the industry at large. While market capacity loosened in recent months, as more and more capacity became available — the constraints associated with driver staffing have remained stubbornly intractable, and we believe it will be an ongoing problem for years to come. What’s more, it’s even more difficult to find and retain drivers with the attention to detail and advanced training necessary to manage specialized shipments by heavy hauling companies.
According to a story by KEPR, a CBS affiliate, the shortage of drivers is on many peoples’ minds. Darrel Harris, president of Yellow Trucking, one of the largest shippers in America says that the worker shortage is driven by older drivers aging out of the industry, “We’re going to need to replace about a million jobs here in the coming decade,” Harris said, “So we’ve got a lot of work to do. We need to bring a lot of younger folks into the industry.”
One bright spot is that in a traditionally male-dominated profession, the industry is now actively pursuing hiring female drivers. The article quotes driver Esther Parsons saying, “Ten years ago, five years ago, I would’ve never pictured myself driving a big old truck. Never.” During the pandemic, the trucking industry was in the spotlight as an essential occupation — as the demand for getting items delivered to our nation’s front doors reached previously unimagined heights.
Parsons says she noticed a change in attitudes toward her industry, “Now we have a totally new respect for truck drivers, who are out here moving America every day. And I think that’s a good thing,” she stated unequivocally.
So, how did our team at Momentum Transportation do with our predictions for this year? Was our crystal ball correct?
Here’s where the rubber really hits the road. Let’s take a look at how well our experts predicted what came to pass in 2022!
Prediction 1: The “New Normal” post-Covid will continue and expand for heavy hauling companies and the industry at large
- What we said: “We’re getting used to managing vaccines, mandates and masks. I would expect more variants are coming, so I don’t see the work from home trend, which has driven the increase in consumer demand, going away anytime soon” said David Hoppens, VP of Sales and Marketing at Momentum Transportation, an award-winning Landstar agent.
- What actually happened: While variants of the COVID-19 virus did continue to emerge throughout the year, the impact of the virus became lessened overall — and we all adjusted. Businesses, such as Landstar and others across the industry, began to bounce back. Now, it’s just business as usual.
More than the COVID impact, we saw the economy rapidly cooling off in the second half of 2022, with inflation rising quickly and consumer confidence falling. As a result, consumer demand has slowed significantly.
Prediction 2: Shippers will focus on better planning
- What we said: Shippers will focus on better planning, particularly in the area of improving load consolidation to reduce capacity requirements. Use of technology will play a pivotal role in helping accomplish this.
- What actually happened: Both of those statements are still true as we wrap up the year. In early 2022, better planning was being used to mitigate limited capacity. Now, with a cooling economy in the face of inflation, it’s being done as a cost control measure. Significant opportunities to turn LTL shipments into full truckloads still exist — so consolidation strategies can reap benefits for shippers.
Customers continue to look to technology to meet business needs. During the labor-constrained months of early 2022 as we were still wrestling with unknowns related to COVID, technology was used to help make the most of limited workforces. For example, electronic notifications on driver locations allowed real-time tracking, without the need to make a phone call. Now the focus has shifted to leveraging technology to uncover new places to save costs.
Prediction 3: Manufacturers will distribute their relationships across more suppliers to reduce risk
- What we said: Distributing relationships with transportation and logistics partners will continue. For example, the increased use of regional suppliers versus a global supplier.
- What actually happened: “Safe shoring” is real. Contract manufacturers are making cross border commitments to Mexico, instead of Asia. After the nightmares of ships being backed up for months at ports, more and more companies are hedging their bets and bringing manufacturing to North America.
Some of our clients in the manufacturing sector are going to double or triple manufacturing output in North America during 2023.
Prediction 4: Labor and capacity challenges aren’t over
- What we said: The talent shortage, labor and capacity challenges won’t be over any time soon. Hiring will continue to be an issue, particularly for jobs that have no work from home option, such as drivers and dock workers. Labor costs will increase, continuing to drive overall transportation costs higher and cause lingering capacity shortages. Covid continues to flare, particularly overseas, and when vessels are delayed, there will continue to be disruptions.
- What actually happened: Unemployment in fact, remains at an all-time low. According to the Bureau of Labor Statistics, the rate of unemployment in November was 3.7%. All of our predictions were spot on and we haven’t seen any evidence that there is change coming.
Conclusion
As we wrap up 2022, the scarcity of available capacity has certainly eased. Spot market rates in the transportation sector are down 10-20% in December of 2022 compared to December 2021, while fuel is up a whopping 29.5%, according to DAT Freight & Analytics. Taking into consideration the tight labor market, the rising availability of capacity and trends in fuel prices, the only thing that’s certain is that uncertainty rules. That’s why the advice we gave at the beginning of 2022 still remains true, so here it is again:
- Plan ahead. The current market is not conducive or kind to last minute decision-making. If you don’t consistently look and plan for what is coming, you will either pay a much higher price or be left to make do with the limited capacity that remains after others have picked over it.
- Make your loads attractive. Carriers and drivers can pick and choose their freight — especially specialized shipments handled by heavy hauling companies. To get the best, pay a price in line with the current market. Take care of the things that make their lives easier and more comfortable. Ensure your shippers and receivers can load and unload in a timely fashion—and create a driver-friendly site that has a clean, well-stocked driver lounge or waiting area, as well as clean bathrooms.
- Build trust with your supply chain partners. Invest the time and effort to communicate effectively. In a volatile, ever-changing environment, it is more important than ever to collaborate and share ideas and knowledge to build a true partnership with all of your supply chain partners.
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