Cargo owners accustomed to the availability of surge freight capacity — at a price — may find 2018 to be the year when it all changed.
In the past, resourceful supply chain managers always had alternatives in their hip pocket to meet the unexpected. Tight truck capacity? Use more intermodal. Intermodal service hiccups? Just dip a bit deeper into the qualified trucker carrier list to get the loads moved. But what happens when those trusty alternatives don’t work? And what are the chances of a real crunch?
While anecdotes can be very useful, there’s no substitute for data. So let’s take a look at a number of data points to see how bad things could get. Unfortunately, the news is not very good.
Truckload spot rates
Data point #1 is truckload spot market rates, which are a useful, if volatile, measure of pressure in the marketplace. The Trans4Cast data from Truckstop.com and FTR show the extent of the problem. The Trans4Cast Market Demand Index (MDI) is a simple ratio of loads posted versus trucks posted. Based on the past five years, a typical MDI level for right now should be under 20. Going into June, the MDI was running in the low 40s. In June it leapt up into the 60s and most recently was 98 percent higher than the prior year over the last four weeks. Dry van spot rates were up over 24 percent versus the prior year over the same time frame. Conclusion: things are already stretched exceptionally tight and barring a slowdown, there’s no reason to expect anything different in the coming months.
Dray demand
Data point #2 is the demand for dray capacity. The situation in the dray markets has implications for both short-haul trucking and intermodal. Our new Drayage Demand Index, a product of a partnership between Gross Transportation Consulting and Drayage.com, is signaling unprecedented tight conditions and extreme volatility. Most recently the index stood at about 200 — twice the normal level of 100. That sounds (and is) very tight, but it is a big improvement from a couple of weeks earlier when the DDI stood at an astronomical level of almost 300. From a seasonal intermodal perspective, June is normally a good but not exceptional month, running about 1.4 percent stronger than average. What’s going to happen in October, which during a normal peak season turns in volumes that are 8.8 percent higher than the average month?