Volatility in the freight space was constant even before the COVID-19 pandemic hit, but the market has definitely gotten even more erratic over the past year and a half. As businesses slowly start to reopen and the economy picks up, that ever-present pressure on capacity is showing no signs of lessening. So, what happened in 2021 (how right were our 2021 freight predictions?) and what can we expect to see as the year reaches a close?
Let’s break it down...
2021 Transportation Review
As we near the end of 2021, it appears the past year brought us a lot of what we expected: volatility, extra cost, and labor shortages.
- Capacity demand drove up rates across full truckload’s spot and contract markets.
- Though service was declining, we still experienced a cost increase in less-than-truckload lanes.
- The truckload index increased 28.5% YOY and 12.8% since January 2021
- LTL increased 9.1% compared to 2020, and 4.1% compared to January 2021.
- International shipping continued to struggle with the effects of the global pandemic, further disrupting the global supply chain with prohibitive delays and excessive costs.
- The cost of fuel has been steadily increasing, driving up costs everywhere.
- U.S. diesel fuel prices have climbed 38.5% since November 2020’s low prices.
- The Energy Information Administration (EIA) forecast shows that the average diesel retail price per gallon was $3.29 as of June ‘21, the highest average since May 28, 2018. (Diesel fuel prices averaged $2.55/gal in 2020.) Currently, the EIA forecasts diesel pricing will stay at an average of $3.07/gal., an increase of 13 cents since Q2 estimates.
- We continued to experience arduous labor shortages, especially when hiring drivers.
- Shipping costs were at all-time highs throughout the year, with everything transported at a premium and moving with surcharges.
Woof. It’s been a challenging year. As the world continues to grapple with this ongoing crisis, what can we expect for the rest of 2021 and the start of 2022? Here’s what we predict.
2021 Transportation Q4 and Beyond
As always, it’s important to look ahead so we can prepare ourselves in whatever way possible for what’s to come. Of course, we can’t predict anything with guaranteed accuracy, but we can look to the past to help us prepare for the future. What should we be expecting?
- The holidays are right around the corner, which means small parcel carriers are looking ahead to fulfill those needs, even if consumers’ e-commerce enthusiasm has taken over capacity. U.S. ports are already being inundated with winter merchandise in preparation for the annual peak shopping season while shippers and retailers alike are floundering over excessively high truckload rates. This is forcing shippers to pay a premium for transportation, regardless of whether they use the spot market or contract trucking rates.
- We believe that for this last quarter, and into 2022, shippers will do well to be creative in how they organize and manage their last-mile strategies while simultaneously being diligent about monitoring their costs. Shippers with storefronts will likely have more success by offering alternative last-mile solutions like curbside pickup and buy-online-pick-up in-store. It may be helpful for those shippers without a storefront to partner with a storefront retailer or another operator to improve their chances of success.
- Supply chain costs, capacity constraints, and continuous delays will continue to be problematic, making shippers’ lives all the more complicated. This means ongoing communication with supply chain partners and customers will be a necessity as inefficiencies continue to haunt the industry.
- Government spending may lead to more volatility in the freight industry for the remainder of 2021, and well into 2022. The $1 trillion infrastructure bill that’s moving through congress will require a variety of physical goods that need to be transported, like steel, concrete, lumber, and building materials. While this is excellent news on one front (we need these improvements!), it will also make hiring even more challenging for shippers nationwide. As the labor market needs more people to work in construction and manufacturing, there will be even fewer applicants for driving jobs, an already historically challenging position to fill.
Finishing off 2021 and starting 2022 off with close to two year’s worth of supply chain challenges and disruptions is sure to lead to continued inefficiencies within the freight marketplace. Shippers and carriers without the technology in place to help them stay ahead will likely continue to flounder.
Beat Volatility with Collaboration
Volatility is commonplace in the freight industry, but it doesn’t have to be. With the myriad of technological innovations today, there are ways to get ahead, and we believe that starts with collaboration. That’s what SemiCab is all about, orchestrating collaboration between shippers and carriers so that we can all work together to reduce volatility, eliminate empty miles, and become more sustainable as an industry.
We facilitate communication, enable collaboration, and bring much-needed transparency to the long-haul freight industry. We create visibility by using real-time data from API-based load tendering and pre-built integrations with TMS and ELD partners, and build fully loaded round trips using AI/ML predictions and proprietary optimization models. By taking advantage of modern technology and advanced optimization techniques, we create efficient one-way capacity and increase the utilization of private and dedicated fleets. The result? Shippers pay less and carriers and drivers make more.
If you’re ready to join our community of shippers and carriers who are committed to revolutionizing the freight space, you’ve come to the right place. Give us a shout, or set up a time to talk to Jagan, our Chief Community Officer.