Tight Capacity Continues, See How Ruan Can Help

Aug 7, 2018 By:

Well into the third quarter of 2018, the trucking industry continues to experience high demand and tight capacity for freight services. Unemployment is low, falling to 3.9 percent in July. The national GDP is growing—4.1 percent in the second quarter. The housing market is booming; the demand for homes—both new and lived-in—far outnumbers the supply, so prices are often too high for buyers, according to NPR.

While the Morgan Stanley Truckload Freight Index, a hallmark in the industry to gauge capacity, has decreased slightly after peaking July 11, the straight-line forecast still projects 2018 freight trending very high. The latest predictions indicate that the index bottomed out the end of August and will regain speed in the coming weeks. 

Coupled with this robust freight market, if economic indicators in the second half of the year prove anything like the first—where large and small trucking companies alike saw both revenue and profits grow—carriers will likely continue to seek rate increases in order to compete in the tightest driver recruiting market in decades.

Rates for transportation services have been increasing for some time. DAT Solutions, an online freight marketplace, reported that June was the 15th straight month in which prices increased on an annual basis in trucking’s spot market; July marked a slight decline to normal levels. And the July Cass Truckload Linehaul Index, which also tracks pricing, continued the increasing rate of acceleration that began 16 months ago—in fact, the July index marked the largest year-over-year increase in Cass’s 13 years of existence.

"We are increasing our realized contract pricing forecast for 2018 from a range of 6 percent to 8 percent to a range of 6 percent to 12 percent," said Donald Broughton, analyst and commentator for the Cass indexes, in a release. "We believe that this is the strongest normalized percentage level of truckload pricing achieved since deregulation (normalized meaning except for extreme periods of recovery from recession)."

Some carriers are using most of these rate increases to pay professional drivers more to attract them to their fleets—and to retain the drivers they already have. Many carriers have raised pay twice since late fourth quarter 2017 as they try to find a sweet spot in a “quickly shifting driver compensation landscape,” according to Gordon Klemp of the National Transportation Institute. Assuming the freight rate market remains strong, more than half of carriers may raise pay this year.

By the end of 2018, Klemp predicts pay will have increased 12 to 15 percent, a significant bump but still not enough to make up for the 16 to 19 percent shortfall of driver wages when adjusted for inflation. 

Carriers able to recruit, hire, and retain safe, professional drivers—plus utilize the industry’s latest technology to gain transportation efficiencies and navigate complex regulations—will see success in the future. Ruan has a strategy in place to do just that.

Are you operating a private fleet or worried about ensuring your freight gets hauled by your current carrier? Eliminate the headache by tapping into Ruan’s Dedicated Contract Transportation solution. With Ruan as your dedicated partner, you’ll experience these benefits:

  • Elimination of driver labor concerns, daily driver management, training, turnover, litigation, and HR administration.

  • Superior customer service.

  • Co-developed key performance indicators to ensure accountability.

  • Focused attention on safety and regulatory issues.

  • Ongoing investment in the latest technology.

  • Availability of capital currently allocated to your equipment.

  • Reduction in insurance costs.

  • Ability for management to focus on core competencies.

  • Reduction in, or elimination of, liability, risk, and exposure of operating a private fleet.

  • Enhanced operating efficiencies, network optimization, and reduction in transportation costs.

  • Seamless transition ensures no service interruptions.

Read more about the benefits of Ruan’s Dedicated Contract Transportation here.

For a free analysis of your transportation spend, please contact our supply chain experts at (866) 782-6669 ext. 7.