In The News

Success in Expediting: Part 1 – The State of Expedited Freight

Editor's Note: Perhaps you're considering expedited trucking as a new business opportunity where you can break free from the office, travel the country, and take on new and interesting work with each trip. Or, you're a veteran expediter looking for new ideas and advice to help you not only survive but thrive in today's market.

Whether you're just starting out or have been in this business for many years, one thing's for sure: knowledge is power. That's why at ExpeditersOnline.com, we've put together a new three-part series on "Success in Expediting" to empower you with the market insight, expert advice, and motivation you need to succeed as an expediter for the long-haul.

This is "Part 1 -- The State of Expedited Freight," where we speak with industry experts to dig deeper into the current state of the market and discuss what they see happening over the next several months.

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According to American Trucking Associations (ATA), the seasonally adjusted For-Hire Truck Tonnage Index increased 2.7 percent in May, providing much needed good news for an industry that has been battling harsh economic headwinds in the past year.

"Following two consecutive decreases [in March and April] totaling six percent, May was a nice increase in truck tonnage," says Bob Costello, chief economist with ATA. "Better consumer spending in April and May certainly helped, but economic growth remains mixed, and I'd expect the recent choppy pattern in tonnage to continue for the next quarter or two."

Lawrence McCord, chief executive officer at On Time Media LLC, the publisher of ExpeditersOnline.com and ExpediteNow magazine, is seeing a similar trend in the expedited trucking sector, based on data from his company's online recruiting platform that tracks the number of applications from drivers and owner-operators.

A rule of thumb: The higher the number of applications, the softer the market. That's because more applications typically signifies that drivers are jumping from one trucking carrier to another, with the hope that the "grass is greener" elsewhere and the new carrier can give them more loads. But the reality is that in a soft market, the grass usually isn't any greener from one carrier to another because all of them are affected on some level.

So what does the data show?

"In February this year, there were about 6,000 driver applications, compared to 4,500 at the same time last year. And the numbers kept increasing until they peaked in May, with application volume almost triple what it was last year -- from about 6,000 to 17,800," says McCord.

But applications in June told a much different story, showing some strengthening in the market, says McCord. "Instead of nearly three-times the applications year-over-year in May, the gap in the June numbers was much narrower -- about 11,000 in 2016, compared to 9,100 at the same time last year. And from what I'm seeing, freight is picking up. Just in the last 21 days, it's getting better."

Softer Demand, Stiffer Competition
A key challenge in the expedite market the past year has been excess capacity, where the number of trucks has exceeded demand.

"Excess capacity has been driving down freight prices on load boards," says Paul Williams, chief executive officer for Expediter Services, which provides business and operational support services for drivers and owner-operators. "So, the carriers that don't have their own long-term shipping contracts and depend on load boards for their business are getting hammered as they compete for freight. And this trickles down to their owner-operators and drivers."

Load boards are online matching systems where shippers and brokers post their freight needs, and carriers bid for those loads, with the award often going to the lowest bidder.

The expediters getting hit the hardest are those who are leased with carriers that are overly dependent on load boards for freight -- and those who drive cargo vans, says Williams. That's because when there's excess capacity, carriers tend to give load priority to owner-operators and fleet owners who have more invested in their vehicles -- such as those who own bigger expediter straight trucks -- to try to keep them happy, even with smaller loads that would be traditionally hauled in vans.

"There are some carriers out there that will no longer take a cargo van," says Williams.

Stuart Sutton, former president of Sylectus and now CEO of Full Circle TMS, a Toronto-based transportation management software firm, agrees and says that cargo van expediters face much stiffer competition than in previous years.

"From what I'm hearing in the industry, Uber wannabe's are starting to make a dent in the transportation sector," says Sutton. They find it hard to compete with somebody living in their vehicle, while the carrier needs to pay for brick-and-mortar business models."

Sutton is referring to startup ventures that offer on-demand transportation services using smartphone applications similar to Uber and Lyft. But instead of coordinating rides to transport people, they match shippers directly with trucks to haul freight -- and undercut the trucking carriers in the process. The drivers are independent contractors who can get into the business with minimal upfront cost, besides the vehicle.

An important bright spot for the expedite market, however, is that multi-year contracts with shippers seem to be holding steady, where carriers aren't getting a lot of pushback from from customers to renegotiate and reduce prices.

"If carriers have built their business on contracts with shippers -- instead of bids on load boards -- they're in a much stronger position, even in a soft overall market," says Williams.

Trend Toward Growth
So, what does the expedite market look like moving forward?

While there's uncertainty that accompanies the U.S. elections in November, there are signs that expedited freight is on track for growth in the next 12 months.

"Based on data I'm seeing, the downturn started about mid-year last year. So, we're a year into this. But it appears that we are near bottom and should be moving up after the first of the year," says Williams. "We expect freight to bounce back and pick up after the presidential election, sometime in the first or second quarter of 2017."

McCord offers a similar outlook. "I think we're getting close to the bottom. From what I'm seeing and the people I'm speaking with in the industry, the next couple quarters are going to start getting better," says McCord.

Capitalizing on This Market
Despite recent challenges in expedited trucking, this market can offer significant opportunities for savvy drivers and owner-operators. How? Stay tuned. In the second installment of this three-part series, we'll "unpack" those opportunities and show you how to capitalize on them in a way that puts you in the best position to win.