The trucking industry has had a volatile few years. The COVID-19 pandemic set in motion a series of market disruptions that have likely forever changed the trucking landscape. High fuel prices, job loss, regulatory changes, and logistics disruptions such as the 2024 collapse of the Francis Scott Key bridge in Baltimore, Maryland have plagued this vital industry in recent years. Constant economic uncertainty, competitive pressures, and global unrest haven’t helped.
Additionally, 2023 was a particularly rough year for trucking after pricing swung in favor of shippers in 2022. 88,000 carriers closed operations. Freight market rates remain favorable to shippers at the time of this writing. In March 2024 alone, trucking companies in Illinois, California, and Virginia filed for bankruptcy.
Yet, even in the face of these challenges, trucking market power remains strong. In November 2023, the American Trucking Association (ATA) published research forecasting trucking’s revenue growth from $1.01 trillion in 2023 to $1.51 trillion in 2034 — accounting for 78.8% of the freight market. There will surely be bumps in the road as the industry forges ahead, but with the right technology, trucking companies can stay profitable and competitive amid swings in the market.
In this blog, we dive into how the variableness of today’s economic — and even political — landscape affects the trucking industry, and how technology is the key to adaptation.
The Shifting Sands of Trucking Market Pricing
Since 2020, the trucking industry has dealt with several changes in market dynamics that have contributed to whipsawing pricing.
Fluctuating, Ever-Rising Fuel Costs
Energy markets have experienced increased volatility since 2020, with many reaching historic highs and lows in just the last four years. At the end of 2022, retail diesel prices were the highest they’d been since 1994, according to the U.S. Energy Information Administration (EIA). While diesel fuel is less expensive overall than it was in 2022, prices continue to fluctuate every month. A $.19 jump occurred just over January – February 2024.
Several global factors have contributed to higher fuel costs since 2020 — the Russia-Ukraine war for one. Supply constraints and a loss in U.S. refining capacity as a result of the war spurred a diesel price hike. The Israel-Palestine conflict also stands to potentially have a longer-term impact on fuel. There has been short-term volatility: on February 8 alone, oil prices gained more than 3% after Israel rejected a ceasefire offer from Hamas. Global concerns continue to broaden about a prolonged conflict in the Middle East.
Changes in Consumer Buying Trends
Purchasing behavior changed immediately at the onset of COVID-19 as e-commerce exploded and consumers demanded more at-home deliveries, faster. As the trucking industry dealt with exits, retirements, and even high mortality rates, it also had to grapple with increased logistics complications and more pressure on last-mile deliveries. Consumer demand was a major factor in the swing of freight market rates in favor of trucking.
After the 2020-2021 shopping surge, demand fell and — for additional reasons as well — power swung to shippers. But as far as retail buying trends go, the landscape has seemingly started to stabilize. Additionally, U.S. ports are reporting overall increases in container volumes from 2022-2023. The Port of Los Angeles reported processing 60% more containers in 2023 over the year prior. The trucking industry should keep an eye on evolving consumer demand, but remember that it’s just one factor in a myriad of complex ingredients that contribute to the freight market rate rollercoaster.
Driver Struggles and Shortages
A report published in the National Library of Medicine states, “Out of all sectors, state-level reports show that the transportation/logistics sector had one the highest per-capita excess mortality rates due to COVID-19.” The report also states that truck drivers saw an increase in positive public sentiment about their jobs but experienced lower job quality because of “closed amenities and decreased social interaction.”
In addition to high COVID-19 mortality rates, the trucking industry also experienced accelerated retirement for many drivers. In 2021, data showed that the trucking industry had 80,000 fewer available drivers than it did in the year prior for reasons ranging from failing drug tests to voluntary exits. Historic increases in driver wages in the years since signal that fleet operators are trying to mitigate high churn; The American Transportation Research Institute (ATRI) found that driver wages increased by 15.5% in 2022. Since then, The National Transportation Institute (NTI) reports that mileage-based pay has continued to increase while base pay has remained moderate.
Tonnage, Parts and Labor Costs, and Other Inflationary Factors
The ATA’s tonnage data found that 2023 was the “worst year for freight since 2020” according to Truck News. Tonnage contracted 1.7% from 2022’s levels, and December 2023 marked the 10th straight year-over-year (YoY) decrease in tonnage. However, the most recent figures from the ATA at the time of this writing point to a snap-back of truck tonnage in February 2024.
Additionally, parts and labor expenses have continued to climb. In the YoY figures for 2022-2023, parts costs were up 0.9% and labor was up 4.9% — both a result of “ongoing inflationary pressures,” says Truck News about the ATA’s data analysis.
What’s Ahead? Regulatory Changes, the U.S. Presidential Election, and Supply Chain Problems
As 2024 progresses, trucking companies should take note of a few pending roadblocks.
Regulatory Shifts
Demand for more sustainable transportation, the proliferation of electric vehicles, and mandates for lower emissions all put pressure on trucking. Proposed regulations for devices that limit truck speed or automatic emergency braking systems — in addition to evolving safety rating systems — require trucking companies to stay on top of laws at federal and state levels. Not to mention, the electrification of the trucking industry is on the horizon, and regulatory changes are certain to arrive alongside that momentous shift. Here are three more immediate upcoming changes that could rattle an unprepared organization:
- As of November 18, 2024, all drivers with an offense or who are in a prohibited status in the Federal Motor Carrier Safety Administration’s (FMCSA) Drug & Alcohol Clearinghouse database will either lose their existing commercial driving privileges or approval for new Commercial Learner’s Permits. See more here.
- The FMCSA is updating its Safety Measurement System (SMS) with nine proposed changes including reorganized roadside violations, simplified severity weights, and a greater focus on recent violations. Learn more about FMCSA SMS here.
- In 2023, the FMCSA published Advance Notice of Potential Rule Making considering “whether to implement a proficiency examination as part of its revised New Entrant Safety Assurance Process as well as other alternatives” which is a signal for fleet managers to stay vigilant about training.
The U.S. Presidential Standoff
The 2024 U.S. presidential election is set to open yet another can of worms for trucking. While it’s difficult to truly predict how the election outcome will affect trucking companies, the ATA has historically been critical of the administrations of both President Joseph R. Biden, Jr. and former President Donald J. Trump. Everything from union support to the federal excise tax could change in the next administration.
Supply Chain Issues
Presidential elections also tend to disrupt supply chains and logistics, which are already shaky for a range of reasons including the recent problems in the Suez and Panama Canals regions.
Supply chain disruptions will likely continue because of the following:
- The Israel-Palestine conflict
- The Russia-Ukraine war
- The Suez Canal emergency
- The drought in the Panama Canal region
- The collapse of the Francis Scott Key bridge in Baltimore, Maryland
- Inflation
- Cyber crime
- Reduction in key materials
- Lack of cross-border cooperation
- Emissions scrutiny
- Climate change’s impact on the agricultural sector
The 2024 freight market outlook might appear grim, especially when research forecasts that trucking bankruptcies and financial distress are expected to continue. Yet, even as 2024 presents such a broad scope of obstacles to grapple with, technology exists to keep trucking agile. Indeed, the trucking industry can more easily adapt to an ever-changing market — including all the challenges above — with the right tools.
Adapting to Change: Strategies for Businesses
The trucking industry has the opportunity to embrace distinct strategies to help it stay nimble in the face of fluctuating freight market rates:
Leveraging Data and Analytics
Leveraging data and analytics tools enables trucking companies to stay nimble through gaining accurate insight into operations. Modern fleet safety and management solutions should automatically conduct data collection for decision-makers — supporting their ability to analyze fleet performance. Trucking companies that choose these solutions gain an advantage over fleets using legacy systems. They can better track regulatory adherence, keep tabs on fuel usage, and optimize routes to better serve customers — to name just three benefits. Here are major ways data and analytics keep trucking companies competitive:
Safety Insight
Advanced dash cams that capture 100% of drive time deliver data to fleet managers to show opportunities for improving safety through training. Dash cams may also help drivers coach themselves, putting autonomy in the driver’s hands to adhere to safety regulations and policies. Immediate access to data about driver performance allows fleets to operate in accordance with regulations as they evolve.
Risk Management
Armed with data about road conditions, vehicle status, and driver performance also helps fleets to manage risk and associated costs — an essential component of agility for any trucking business. Fleets can leverage video data to exonerate drivers in the case of collisions or quickly identify situations where an early settlement makes sense, resulting in stronger financial stability. Decreasing risk also helps fleets attract and retain talent in an industry with a driver shortage and notoriety for being the sixth most dangerous profession in the U.S. Keeping drivers happy means lower churn and lower recruitment costs.
Fuel Analysis
Fleet management solutions can provide insight into fuel economy in a few ways. The technology captures data about driver behavior that contributes to fuel waste such as rapid acceleration. It also illustrates opportunities to optimize routes so drivers can maximize fuel efficiency. In another way, fleet managers that leverage data about vehicle maintenance needs also see better fuel economy because they keep up on required repairs that allow vehicles to be as fuel efficient as possible. All of these strategies contribute to reduced costs.
Embracing Agile Methodologies
The Harvard Business Review explains that agile methodologies are ones that involve “new values, principles, practices, and benefits” and are a “radical alternative to command-and-control-style management.” They keep organizations collaborative, and they prioritize information-sharing — two important priorities for staying fluid as freight market rates change. For trucking companies, agile approaches may look like this:
Changing the Driver Training Process
If your fleet is accustomed to a reactive training approach — meaning you only call drivers in for feedback when something goes wrong — you’re missing out on the benefits of a proactive approach and positive feedback. Fleet safety and management solutions allow you to see trends in driver behavior and to flag certain habits before they create a safety hazard. Stepping in with positive and proactive measures allows your fleet to avoid the expensive aftermath of collisions and other mistakes.
Putting Positive Reinforcement Center Stage
Traditional driver feedback methods typically include pinpointing negative behavior only. Positive behavior goes unrecognized. You can use fleet safety and management tools to highlight excellent driver performance and deliver accolades to your top drivers. Doing so in a public, company-wide manner showcases to other drivers that your organization sees, acknowledges, and appreciates their great driving as something to emulate.
Introducing Gamification and Rewards
Or maybe you choose gamification as a way to motivate drivers to do better. Netradyne’s GreenZone®️ Score has helped fleets revolutionize driver motivation to achieve safety goals. The Driver•i app enables drivers to stay up on their driving performance in real time, see their GreenZone score reflect their performance, and take control of their improvement. With a powerful app, rewards program, and incentives, drivers not only perform better, but you cultivate a strong safety culture that ensures your fleet’s ability to stay compliant.
Innovations Influencing Market Power
In a changing market, trucking organizations need to integrate human skill with advanced technology whenever possible — freeing up humans to apply intuition and judgment to strategy. Artificial intelligence (AI), automation, machine learning, and edge computing have all arrived to help trucking withstand the winds of change and maintain market power in an uncertain future.
The Rise of AI and Automation
AI’s ability to collect and analyze vast amounts of data contributes to all the benefits discussed above regarding leveraging data and analytics. From proactively addressing safety concerns to staying on top of vehicle maintenance and driver behavior, fleet managers use AI-powered fleet safety and management tools to gain rapid access to comprehensive data about every aspect of their operations.
Automation also allows managers to do more with less. Automatic in-cab safety alerts keep drivers aware of their habits and give them a way to self-correct. Automation can generate reports for fleet managers so they can easily see and analyze fuel usage and make decisions about how to optimize routes.
Machine Learning and Edge Computing
Machine learning supports AI’s ability to automate repetitive tasks, deliver valuable information, and reduce inefficiencies. For example, Netradyne’s fleet safety and management solution leverages machine learning to train the platform to recognize unsafe driving behaviors — such as distracted and drowsy driving — and identify hazardous environmental factors.
Edge computing supports these technologies by eliminating the risk of data loss and speeding up response times. It refers to processing data on a vehicle’s computer rather than in a centralized data center. When conducted on an edge device, these processes don’t encounter the same latency — and experience delays — since data travels across shorter distances.
FAQ’s: Navigating Market Power Shifts
- What strategies can businesses adopt to remain competitive in a changing freight spot rate market?
Trucking organizations can adopt advanced fleet management technology that allows them to gain insight into fuel economy, driver behavior, vehicle maintenance needs, and more. With the right data, fleets can cut costs and do more with less — enabling them to stay nimble in a changing market. They can also embrace agile methodologies that transform driver training and feedback processes to keep drivers happy and reduce churn. - How can companies prepare themselves for future freight recessions?
Establishing strong financial stability and adequately managing risk are two major ways to prepare for challenging economic conditions. Fleet management solutions that use AI and machine learning to help trucking companies cut costs and take proactive safety measures are prime choices for achieving these goals. - Do technology solutions such as Netradyne pay for themselves?
Ready to shore up your fleet so you can stay competitive no matter what freight market rates look like tomorrow? Explore the Driver•i AI Fleet Camera System today. Book a demo.
