Here’s a look at what’s on tap for shippers as 2018 comes to a close, the holiday season kicks into full gear, and the new year approaches.
It’s that time of the year again. With fourth quarter upon us, it’s time to look at the key transportation trends that have unfolded in 2018 and take a peek into our crystal ball to figure out what lies ahead in 2019.
Resting somewhere between those two points is the 2018-19 holiday season—a time when any capacity crunches, driver shortages, and regulatory issues that impacted transportation throughout the year can suddenly turn into monumental challenges for shippers.
That’s because from late-November through December 23, retailers and other shippers scramble to secure trucking capacity in order to stock their bricks-and-mortar and virtual stores. With the right combination of forecasting, collaboration, and working with experienced logistics providers, these companies can meet their goals in even the most challenging transportation markets.
In return, shippers can maintain their on-time delivery rates and ensure high levels of customer satisfaction, both of which are mandatory in today’s time-sensitive transportation environment.
Hitting those targets could be more challenging this year, namely because retail holiday sales are expected to increase a robust 5 to 5.6 percent over last year’s shopping season, according toDeloitte’s annual retail holiday sales forecast.
Holiday Sales are on a Tear
Deloitte expects total holiday sales (seasonally adjusted and excluding motor vehicles and gasoline) to exceed $1.10 trillion between November and January. Additionally, Deloitte forecasts a 17 to 22 percent increase in e-commerce sales in 2018 compared with 16.6 percent in 2017. In total, e-commerce sales are expected to reach $128 to $134 billion during the 2018 holiday season.
“Shippers looking for a return to more balanced market conditions shouldn’t set their hopes very high — at least not until the second half of 2019, based on currently available market data and projections of US economic growth,” JOC reports. “Some believe today’s bullish conditions — for truckers, that is — will last longer.”
Transportation pricing “equilibrium” isn’t likely to return any time soon, the publication adds, noting that the U.S. economy is absorbing capacity “faster than trucking companies can add trucks and drivers.” The nation’s real gross domestic product (GDP) expanded by 4.2 percent in the second quarter and 3.8 percent in the third quarter.
“Carriers continue to scramble to get enough trucks on the road to handle the robust freight growth,” JOC notes, citing a recent FTR report. “The surging economy and vibrant manufacturing sector are stretching the logistics system to the limit.”
100% Utilization and Still Going Strong
In Projections for 2019 freight market: Things could get “murky,” Fleet Owner paints a picture of a 2019 transportation environment that could be even more challenging than it was this year.
Right now, the industry is seeing freight levels that are up at 25% year-over-year, with no signs of slowing anytime soon.
“We are basically at 100% utilization,” transportation intelligence firm FTR pointed out. “That means anyone who has a truck and a driver is moving freight. This is unprecedented, and we do not see it easing back until the end of the year.”
As capacity continues to tighten, the industry has also seen a surge in order activity, Fleet Owner reports. Concurrently, carriers are charging shippers more for their services. “This is unprecedented,” FTR reports. “We have not seen this kind of growth in the freight market. This is something that allows you to make better decisions for 2019.”
According to the ATA, this strong economic climate for trucking could continue for the next 18 months or more, depending on ongoing negotiations with Mexico and Canada over the North American Free Trade Agreement and other factors. Overall, the trucking industry moves more than 70 percent of the nation’s freight by volume and earns more than $676.2 billion in revenue annually.
Whether carriers can find enough drivers to meet freight demand is another key concern.
The industry was short about 50,000 drivers in 2017, the ATA reports, and that number could rise to 175,000 by 2026.
Steps to Take Now
The good news is that there are steps that shippers can take to secure capacity and keep their supply chains humming even as the industry gears up for the holiday season and preps for 2019.
“One of the first steps all shippers should take is to align themselves with a reliable logistics provider that has established, long-term relationships with carriers,” says Chad Heller, DB Schenker’s Chief Commercial Officer, USA. “This alone can help to prevent small issues from turning into major issues once the holiday season is in full swing.”
Good forecasting also goes a long way in capacity-constrained transportation environments. Look carefully at your firm’s overall sales projections while also factoring in the more unpredictable “spikes” that could come smack in the middle of the holiday season. Use historical data, for example, and then factor in 2018’s numbers to come up with the most accurate possible forecasting projections.
Then, share those numbers with your logistics providers. The more these valued partners know about your business and the potential sales numbers, the better. Good transparency in this area allows your logistics partner to manage carriers to their capacity commitments and then tweak forecasts based on actual results (not just guesswork).
“We have an inside track with carriers and other providers, but we can’t maximize those relationships and secure extra capacity if we don’t know your sales/order projections in advance,” says Heller. “As one of the world’s largest NVOCC’s, we have the flexibility to utilize multiple carrier relationships to move our customer’s cargo during peak times like this.”
A Multipronged Approach
As the transportation industry winds down for the year and gears up for another busy one in 2019, shippers and their logistics providers should proactively prepare for any potential capacity-related issues while also maintaining pricing levels and establishing strong relationships with carriers. By taking this multipronged approach to the market, you’ll be best positioned to not only succeed during the peak season, but also well into 2019.