Ground Transport Trends: The Future of the Logistics Industry

Trucking Industry as Leading Indicator for Future Business Trends

Trucking industry trends show no relief in sight through 2022. The costs of shipping are at historical highs. Fuel, labor, and other transport costs have spiraled to highs not seen in decades.

What’s to blame?

The administration claims the Russo-Ukrainian war has caused inflation. However, the data show otherwise. Relevant data show that prices were on the rise well before the start of the war. Nonetheless, the war is a contributing factor.

Economic sanctions intended to pressure Russia are having a reverse effect, calling into question their viability. For example, Germany, the EU leader of the Green Movement, has resorted to burning coal to fill the gap created by sanctions against Russia.

The government shutdown of drilling on federal lands has had a chilling effect on oil production. Since the administration’s shutdown, the U.S. has shifted from being an energy exporter to an energy importer.

There’s more, but you get the gist. Inflation is global, and that puts pressure on consumers worldwide. Eventually, that may lead to a destruction of demand, but that’s not certain.

How much the Federal Reserve raises interest rates will determine whether inflation gets tamed, persists, or spins out of control. Currently, the Fed is walking a fine line between lowering inflation and avoiding recession.

Hence, you’re operating in an environment of increased risk and uncertainty.

All of the above affect businesses and consumers globally. As a shipper, a key concern is how these factors affect the trucking industry. In tracking the trucking industry, we’re tracking a leading economic indicator.

The value of tracking the health of the trucking industry

In zeroing in on the trucking industry, we’ll gain key insights into the health of the logistics industry. For example, in examining shipping prices, we’ll gain insights into the spot freight market. Other helpful indicators include the persistent driver shortage, container capacity, and technology innovations.

Tracking those and related indicators can provide a useful path in planning your supply chain for maximum efficiency. Understanding trucking industry forecasts can inform how you position your supply chain for success.

Shipping prices remain high through 2022

You’ll find yourself in a fiercer, more competitive environment as shipping costs rise.

Since transportation costs comprise 63 % of logistics costs, we’ll examine how spiraling costs shape industry trends.

In the first quarter of 2022, inflation hit shipping prices. As of May 2022, prices increased 21.3%, according to Logistics Management. One month later, in June, transaction prices increased by 34.4 %.

All trucking sectors increased by over 20 %, from local trucking to long-distance trucking to refrigerated trucking. Inflation left no sector unscathed.

Trucking companies increased their prices, reflecting existing market conditions.

  • As of May, the CPI was up a surprising 8.3 %.
  • Fuel prices also increased as the government halted drilling on federal lands.
  • Labor costs increased as trucking companies competed for a shrinking labor pool.
  • Economic sanctions against Russia expanded, which boomeranged and put upward pressure on prices in the EU and U.S.

Until some of these cost factors ease or get resolved, prices will remain high.

Persistent driver shortage easing

Data suggest that industry driver shortages are abating. Hiring is at an all-time high. Competition in the spot market has moderated. Contract rates are higher, but historically they lag price action in the post-market by about six months.

Citing Bureau of Labor Statistics (BLS) June Report, reported that “… trucking

companies added a record 62,400 workers to their payrolls, compared with 31,400 in the same period last year and 37,800 employees added from April through June 2020, when trucking began to bounce back from severe job losses during the early days of the pandemic.

This surge in hiring suggests a growing economy, not a recessionary one.

Also, from September 2021 to March 2022, the price of shipping a container declined by over 20 percent on average. The main reason cited for this decline is the availability of trucks. That suggests container capacity is increasing.

Another indicator is the significant reduction in the time required to unload cargo ships at the Port of Los Angeles. According to a Harvard Business Review article, the number of cargo ships waiting to be off-loaded in May 2022 was 39 compared to 103 in January 2021 at the Port of Los Angeles. That’s a sizable drop of 62 %.

The same article mentions that driver salaries have risen. As trucking companies compete for a limited driver pool, companies have raised salaries, attracting more truck drivers. So, the factors mentioned above combined are easing the persistent driver shortage.

The trucking industry outlook and what it means

The outlook for trucking industry costs shows a continued trend of high prices for the rest of 2022. Industry forecasts project a staggering annual inflation rate of 25.7 % through the end of the year. After that, in 2023, economists forecast a more moderate inflation rate of 3.3 %.

Not to be unduly optimistic, the trucking industry will face some bumps along the way. The transition to the post-pandemic marketplace has begun and will not be without some risk and uncertainty.

The challenge is getting from where your business is now to where you want it to be.

At American Global Logistics, we work with our customers to find a smooth, even-paved road. We track trends in ground transportation to minimize or avoid disruption to your supply chain.

Call American Global Logistics today to find out how we can help you get ahead of the trends. We can help you leverage your supply chain as a competitive advantage when you stay ahead of the trends.