The trucking industry is navigating a challenging market marked by overcapacity, weak rates, and high operating costs. To survive, fleet operators are focusing on efficiency, technology, and close collaboration with shippers.
Royal Jones, CEO of Mesilla Valley Transportation, highlights the importance of cost-saving measures. “I can’t ask customers for more pennies right now. If I can find ways to save pennies, it is the same thing,” he said, noting that every penny saved per mile translates to significant monthly savings.
Since the COVID-19 pandemic, the trucking market has been volatile. According to Dean Croke, principal analyst at DAT iQ, the current market conditions resemble those of late 2018 and 2019, with low demand and an oversupply of capacity. Spot rates are similar to 2019 levels, and shippers continue to drive down contract rates due to surplus capacity.
The influx of new motor carrier authorities during the pandemic has contributed to the overcapacity issue. Despite some exits, many small carriers remain, resulting in more trucks than loads. This imbalance has led to several high-profile carrier bankruptcies, including Yellow Corp. and Arnold Transportation Services.
Lindsay Bur, senior economic analyst at the American Trucking Associations, noted an increase in carriers leaving the industry, but the rate is slower compared to previous downturns. One reason for the slow exit is banks’ reluctance to repossess equipment, which carriers bought at high prices during the pandemic.
Carriers are grappling with low rates and rising operating costs, including wages, fuel, insurance, and equipment expenses. “A new truck today costs so much more than it did five years ago,” said Jones, adding that some brokers are offering rates significantly below carriers’ costs.
To navigate these challenges, carriers like Mesilla Valley Transportation are optimizing operations. Jones’s company has reworked its fuel optimizer and reduced stops, saving time and fuel. Similarly, Old Dominion Freight Line partners with shippers to identify efficiencies, such as improving packaging to enhance loadability.
John Luciani, COO of A. Duie Pyle, emphasized the importance of carrier performance in controlling transportation costs. His company focuses on maintaining high on-time delivery rates and low claims ratios to offer value beyond competitive rates.
Josh Allen, CCO of ITS Logistics, highlighted the role of technology and network optimization in increasing efficiency. His company has increased its load count significantly through these measures.
Even in a downturn, investment in technology and business improvements remains crucial. UPS, for instance, is enhancing efficiency through its Network of the Future initiative, deploying automation, robotics, and AI.
ITS Logistics is also investing in new facilities and assets to build stronger customer relationships. These investments position the company for growth when the market recovers.
Old Dominion continues to seek competitive advantages through strategic investments in equipment and facilities, ensuring they are well-prepared for market recovery.
Source:
https://www.ttnews.com/articles/fleets-surviving-soft-freight
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