“As shippers navigate the deflationary market, this is the time to strengthen relationships with loyal carriers. As the carrier supply further exits, the spot market is going to tighten towards the year-end and into 2024, and the tender rejections will likely increase. Building a long-term transportation and procurement strategy is going to help navigate through the inflationary leg of the cycle.”

– Amit Prasad, Chief Data Science Officer 

TL Spot & Contract Cost Curve (% YoY Change by Quarter)  

Truckload Spot & Contract Forecast with Beon™ Band

• Spot: Lower-than-projected freight demand due to softer economy and plummeted imports in Q1 2023 took the Beon Band* further down to -35.5%, making it the new bottom of the deflationary leg. We project that the curve will now move upwards towards the equilibrium from here with Q2 2023 around -22.5%. We expect that it will stay inflationary for the entirety of 2024 reaching the peak of inflation in Q4 2024.
• Contract: The truckload (TL) contract cycle finally entered the deflationary leg in Q1 2023 at -7.1% year-over-year (YoY), close to our forecast of -7.5%. We expect the contract cycle to go further deflationary in Q2 and Q3 2023. It will likely start heading towards equilibrium in Q4 2023 and should cross the X-axis in Q2 of 2024. Contract cycle lags spot cycle by 2-3 quarters. 

*The Beon™ Band rolls up YoY quarterly averages of data to create trend lines. This band is the outcome of the relationship between freight supply and freight demand, with freight demand being driven by the macroeconomic demand indicators. When we overlay the Beon™ Band with the demand curve in a single chart, we can see demand’s influence on the to-the-truck costs.

Mode Forecast

Drayage

Lackluster imports will continue through this quarter as shippers focus on shipment accuracy and carriers adjust to volume challenges. Shipper KPIs drastically shifted compared to Q2 2022, when the main concern was available capacity and tender acceptance. 

As of late, shippers are less focused on capacity and more focused on invoicing speed, accuracy, carrier accessorial scrutiny and visibility. Labor tensions on the West Coast are steering shippers to the East and Gulf Coasts, such as Port of NY/NJ, Port of Savannah and Port of Houston. Total U.S. Port TEUs are down YoY, but we have seen a 6.9% increase in volume from February into March 2023.

LTL  

This quarter, shippers need to re-evaluate their carrier usage as carriers’ pricing has allowed rates to hold above standard. Many shippers still think LTL carriers should be dropping prices to gain more volume. The reality is some carriers are making small adjustments to prioritize more attractive freight (standard-size pallets, business-to-business). Shippers need to work closely with key incumbents during rate negotiations and service-level reviews to create win-win results.   

Parcel   

Rate increases are no longer sustainable. Now is the time to be more open to negotiating and diversifying the carrier base as capacity softens.  

Some important things to keep in mind for small parcel. In, 2022, the average rate increase for FedEx and UPS was 6.9% compared to 5.9%. The UPS Teamster contract expires on July 31, 2023, as national negotiations began in April 2023. Shippers are moving volumes away from UPS to mitigate the risk of a potential strike. Startups and regional carriers doubled their collective package volume in 2021 and witnessed an additional 25% growth in 2022, according to the Pitney Bowes Parcel Shipping Index.

Cross-Border  

Demand for cross-border services between U.S. and Mexico remains strong for the second quarter of 2023 as U.S. and Canadian volume remains low.  

Canada

Capacity outbound from Canada, especially out of major metros, remains very strong and up more than 4% YoY according to Census data. Carriers are looking for consistent opportunities to get them on the U.S. side of the border because of the relatively stronger demand for U.S. imports into Canada.  

Mexico

Trade between U.S. and Mexico continues to grow, increasing by 10% in the first two months of 2023 compared to the same period in 2022. Mexico was ranked number 1 among U.S. trade partners during the first two months of 2023, showing demand for cross-border transportation services will continue on both sides of the border. 

Market developments in the first half of the year have remained steady, but shippers are still working through existing inventory, meaning import levels are still low. Here are three tips shippers need to know for a successful rest of 2023 and beyond.  

Tip #1 

Live up to your commitments. Once a lane is converted to contractual, honor that volume commitment if meeting service requirements and avoid the temptation of a slightly better spot price. While spot is attractive at the current rates, you could open yourself up to more risk onboarding a poor service provider taking advantage of current market conditions.   

If shippers are not focused on contingency planning for Q4 2023 and early 2024, they run the risk of higher costs, lower service quality and inevitable delivery delays later in the year. The freight industry is very cyclical. This could be the bottom now, but shippers must be prepared for when the market turns.  

Q2 2023 is not a period to sit on your hands. Instead, it’s time to work in tandem with your 3PL and carrier partners to discuss what the second half of the year will look like and plan accordingly. We all know rate volatility is real…and it’s about to get even more real when the market does flip. Don’t wait to act until it’s too late.” 

Drew Herpich

Chief Commercial Officer at TI & NTG

Tip #2 

Move as much volume as possible from the spot market to the contractual market over the next 3 months. When doing this, focus on higher volume lanes (over 52 loads per year) or on higher volume markets where you can find competitive contractual rates.  

As a result of decreased demand and an oversaturated carrier market, May 2023 spot rates are currently at -26.8% YoY and have just started their journey upward, yet inflation remains well above the Fed’s target of 2%. To succeed in this environment, it is crucial to have visibility into internal and external datasets and conduct proper planning for when the market approaches inflationary territory.  

Shippers will be more cautious in replenishing inventories as they continue to wind down last year’s inventory surplus, which was the highest YoY comparison at +11.4% in Q3 2022. As consumers are more careful with their spending, and larger portions of consumers’ paychecks are going toward essentials such as food, consumers continue to prioritize service purchases over goods purchases.  

Many consumers are utilizing credit to continue their spending habits, returning credit card debt to record-high levels which are currently up 16.5% above February 2022 levels. Interest rates are also not helping consumers. As a result, there are growing concerns that consumers will be unable to maintain the same level of consumer spending in the second half of 2023.   

Tip #3 

Benchmark carrier service metrics, such as tender acceptance % and on-time pickup/delivery, so you can hold them accountable to the same performance levels in the second half of 2023 and beyond. This is crucial heading into 2024 with rates expected to be in the carriers’ favor again.

The spikes in the market are becoming more dramatic since the pandemic. Carriers have floors to their pricing relative to their operating costs, typically in the $1.65 to $1.70 cost per mile (CPM) range (excluding fuel), which means we can normally anticipate when capacity will have to exit altogether. However, because of the decreasing fuel costs and lack of opportunity to switch to another craft, drivers are holding out longer this time around.

For any material change in spot rates to occur, there needs to be a capacity dislocation event, or catalyst. The question remains, will it be increased demand or capacity attrition? As it stands right now, it appears that demand will only get a modest gain from Produce Season, thus the catalyst will most likely be enough attrition of capacity to cause a steeper increase in spot rates. With net revocations of Carrier Authority running above 7,000 per month since October, we’re seeing capacity exit. We believe this trend will continue throughout this quarter and into the next.

Shippers can’t afford to wait for market changes to plan – it’ll be too late. Take advantage of the current market and put plans in place for the second half of the year that’ll yield favorable business results in Q4 2023 and into 2024.

Read our Q2 Transportation Outlook to gain even further insights into the market, rate forecasts and mode projections.

Twice a year, the Commercial Vehicle Safety Association (CVSA) conducts braking system inspections. Brake Safety Week for 2022 is scheduled for August 21 – 27 across the U.S., Canada and Mexico.

Brake systems are obviously the single most critical feature of federal motor carrier safety and demand maximum attention. Four of the 14 amendments to the North American Standard Out-of-Service Criteria (OOSC) for 2022 were focused on brake systems. The hoses on commercial freight vehicles are of special concern because they are so exposed to the elements, road conditions and the constant motion of trailer couplings, axles and wheels.

During Brake Safety Week, in addition to the visual inspection that can spot hose wear, some inspectors will be using Performance-Based Brake Testers (PBBT). These devices test the entire system and help identify leaks, poor fittings, or weak spots (which bulge under pressure). Such issues are not as easy to spot with a visual inspection but can be even more serious. If drivers have any concerns about the age or soundness of any component of their braking system, that deserves a more technical inspection.

This can be part of overall preparation for Brake Safety Week. To help drivers get ready, here is a preparation checklist produced by the CVSA’s Operation Airbrake.

Trouble areas to look for include:

• Chafing or rubbing air lines against other air lines and/or other components
• Air lines that are worn to the extent that the diameter of the hose has been reduced
• Damaged, broken or missing components (such as brake chamber bracket, clevis pin, slack adjuster,
• cam shaft, etc.)
• Pads or linings that are cracked, contaminated or worn below safe thicknesses
• Excessive up/down and sideways movement on the camshaft, indicating worn bushings
• Rust on the drum due to inoperative brake or external drum cracks
• Rusted (holes) in the brake chamber
• Audible air leaks in the emergency side of the brake system

Beyond the brakes, inspectors will be conducting complete North American Standard Level I and V inspections. Drivers will want to use this opportunity to make sure their certifications and vehicle are up-to-date and compliant.

These inspections enhance the safety of every individual driver, along with the general public and the industry overall. If you have any questions about how to keep your operations moving smoothly, contact an NTG representative.

Carriers can obtain endorsements on top of a CDL (Commercial Driver’s License) in order to run specialized shipments. Endorsements are certifications drivers have to obtain that require additional knowledge and skill set. Specifically, a T-Endorsement allows a driver to tow double/triple trailers in additional to the regular freight trailer. It’s important to know that a T-Endorsement never expires and will last as long as a driver retains their Class A CDL. 

Why Should a Carrier Obtain a T-Endorsement? 

1. More load options become available to carriers with a T-Endorsement. As we approach Peak Season, this is one option for carriers to have access to additional loads solely due to the double/triple certification.   
2. Higher pay on loads that require a T-Endorsement. Such loads require a knowledge niche and special driving skills to operate double/triple trailers, so carriers earn more money on these load options. Look at it this way: carriers are hauling double (sometimes triple) the freight for the same time as they would haul a single trailer. This allows for earning more money in the same timeframe as for a standard run. 
3. Convenient schedule becomes a reality. Double/triple loads are round-trip, allowing carriers to be home every night and taking advantage of schedule that works for them. 
4. Minimal equipment is required to run T-Endorsement loads. Carriers only need a power unit and a pintle hook and they’re good to go. Carriers have to be able to perform the coupling/uncoupling process (physically attaching/detaching trailers) in order to deliver the shipments.  
5. Sign up process is easy and affordable. The specific process to obtain a T-Endorsement varies by state but generally the sign-up process is simple and affordable for carriers.  

How to Obtain a T-Endorsement? 

As mentioned above, each state has its own qualifications for T-Endorsements. Most states, however, will require the following: 

1. Possession of a CDL Class A license 
2. Pass a knowledge test  
3. Minimal certification fee – usually between $0 and $50, depending on the state 

Carriers can find specific state T-Endorsement qualifications on that particular DMV state government website.  

Still have questions? Contact Us below and we’ll be in touch shortly!