After several years of extreme volatility, the freight market in 2023 is certainly behaving differently, yet the outlook remains unstable. But before we delve into the underpinnings of freight, we need to look at the broader economic picture. The macro environment is uncertain as the Federal Reserve continues to increase interest rates hoping to contain inflationary cost pressures and avoid a prolonged recession and a hard economic landing. Even though unemployment rates are still very low, price pressures along with a spending shift from goods to services are impacting consumers’ spending habits. And most recently, with the disruption in the banking industry, there is potential impact on the go-forward actions from both the Fed and lenders, which could further influence consumer behavior.
Regarding the freight market, capacity availability has significantly improved the last several months. Most carriers and third-party brokers are clamoring for more volume and jockeying for position on routing guides. The race is on as they say. The question posed most often by our clients is, “for how long?” Shippers are currently readjusting networks and in doing so, must wrestle with this question so they can better determine their approach to the freight market. On one hand, most are under extreme pressure to reduce costs and drive savings back into their organization. On the other hand, limiting disruption that manifests itself in poor compliance or bad service must also be a consideration.
Meanwhile, carriers are faced with their own dilemma: managing significantly higher input and operating costs with freight rates that are under pressure. And although spot rates are near their bottom at below break-even levels, the contract market remains highly competitive and negotiations could probably best be described as “spirited.”
With all of that as a backdrop, we recommend shippers consider the following:
- Be Cautious and Play the Long Game – While it’s tempting to choose options that provide dramatic or immediate economic benefits, impulsive decisions could be detrimental for your business. We recommend selecting a few core providers who offer a wide array of services and whose support you can depend on throughout the cycles. In addition, resist the temptation to treat all suppliers the same. Rather, treat service providers based on how they behaved and performed during the recent strong freight market. If you were treated fairly and loyally, reciprocate. If not, change is likely in order.
- A ‘Tale of Two Halves’ – We hear this phrase often, so it begs the question: Could the story of 2023 be a tale of two halves, with possible market stabilization in the third or fourth quarter? Lower imports, moderating industrial production and excess capacity supply have created an opportunistic environment for shippers thus far in 2023. However, within a matter of months, inventory restocking is expected to normalize, interest rates should stabilize and supply is likely to tighten. Both FMCSA carrier activation data along with trucking employment numbers clearly indicate that the truckload sector is shrinking in response to the current market conditions. Considering there really was no “peak season” in the fall of 2022, it seems reasonable to expect the freight market to strengthen in the back half of 2023 and provide some traditional peak season tightening as we approach the holidays.
What Werner is Doing
Over the last few years, freight conditions have changed drastically and at a faster, more dramatic pace. In other words, the freight cycles tend to be quicker and more violent. At Werner, we were built to navigate the dynamic truckload freight market and are steering through the current economic environment by leveraging the following:
- Being Dependable – Our goal is continued durability to provide exceptional service to our customers with a safety-first mindset. Loyalty between shippers and service providers goes hand-in-hand, and we keep the promises we make to those customers who do the same.
- Leaning into Innovation – We continue to leverage technology in numerous ways that position us for future success. For example,we took another step toward becoming the first North American carrier to move our entire tech stack and operations to the Cloud through deploying MasterMind TMS, a cloud-based transportation management system from Mastery Logistics Systems, Inc. Our “Cloud First, Cloud Now” strategy enables greater innovation and helps us keep up with the complex demands of the ever-changing industry landscape. Another innovative solution is Werner Bridge, our new digital freight platform, which connects carriers to high quality freight across the country. Click here to learn more about how we are at the forefront of technology.
- Expanding our Portfolio – Werner has continued making strategic moves ensuring a well-positioned portfolio of solutions to serve our customers cross-functionally. We recently launched our new power only program, PowerLink, giving our carrier partners access to consistent driver-friendly freight, while enabling them to reduce their cost profile and access rewards for service and safety. With our recent acquisitions of Baylor Trucking and ReedTMS Logistics, we continue to capitalize on opportunities that complement and enhance our suite of services.
As we go forward, we will continue to leverage our Werner DRIVE℠ strategy as the sound blueprint for future growth, guiding focus on areas that ensure success for our customers, associates and shareholders. Regardless of how the tale of 2023 unfolds, it remains our pleasure to serve you.