Is the Trucking and Logistics Industry Volatile?
One of the most volatile industries around the world is the energy sector, say, oil and gas. This is widely known, and you can always seem to rely on it to change, boom or bust, every two to eight years it seems. But what about the transportation industry, what causes the highs and lows in our sector and how often do they happen? By doing our best to predict these trends, can companies fair better with the right preparation?
While we all know that oil and gas can have dramatic shifts that affect the economy, does our industry also go through the similar, if not the same, types of shifts? That’s hard to say as historical data is historically unreliable. It is hard to predict when shifts in the market will happen. We believe Freightwaves.com said it best:
“Significant one-time events can lead to a flux of capacity entering the market. This was the case at times during 2017-2018 when tax policy spurred business-business activity and capital expenditures. In addition to increased business investment, tariff uncertainties caused a spike in activity to avoid tariffs, which resulted in a massive pull forward of goods. That event was not permanent, so it cannot be used as an accurate projection of freight market trends going forward.
In fact, it is exactly the type of temporary event that makes relying on historical data problematic. Subsequently, much of the capacity that came on-line to deal with the surge of activity was removed from the industry in 2019 as demand declined, resulting in another historical abnormality.
Once a substantial deviation from the prevailing pattern has been established, historic data loses its significance and real-time data trends become paramount to project where freight demand is going.”
For example, one of the looser trends we’ve seen in the market is that March was typically always a busier month for the usual shipping contracts up until recently this year. Tender rejections increased while the spot market began to flatten, putting both bigger carriers and small businesses as well as owner operators at a disadvantage.
You can bet that the logistics and freight industry is still feeling the effects of the pandemic with shortages and supply chain issues in its’ wake. So, while the initial answer is “yes, our industry can be volatile at times” – it is hard to compare what we’re seeing in today’s market to anything we’ve experienced in the past.
From tariffs to gas prices, to shortages and decreased workforce, and longer detention times the trucking industry is suffering from all these pain points at once. It is as if there is no real predictor of what the market will do next so it makes it difficult for companies and carriers to prepare for whatever may happen.
For now, what we can see is shipping rates are falling as trade volumes decrease. Consumers are spending more of their dollars on services/experiences rather than goods. Though, experts say that freight slowdowns this dramatic can be signs of a looming recession, which we all have heard plenty about recently.
Whether you are a small business or a mega carrier, a recession can eventually touch everyone in the industry. The most basic tip for anyone is to pay close attention to the freight market. Watch the number of tender rejections, the spot market, the delays, the CPI and be ready to adapt and pivot strategy when needed.
Need a company that has survived and thrived through it all? Call Meadow Lark to get you back on track for your company’s’ growth! (866) 736-5233