Q1 2022
Market Update
& Outlook
Report
Tap into valuable market insights
What should you expect when it comes to the transportation market this year? Will pandemic disruptions, tight capacity, inventory shortages and uncertainty continue? Or is there light at the end of the tunnel? Discover data-backed intelligence and recommended actions for North American and European shippers to advance logistics strategies in our Q1 2022 Market Update & Outlook Report.
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Cost and capacity pressures to remain through the year end
Scroll to the right to see insights on rates, supply, demand, labor and policy.
Rates
- Contract rates are still increasing following the spot trend
- Spot rates are at a 29% premium over rising contract rates for dry van and a 47%
premium for temperature-controlled
- There is continued pressure on incumbent carrier pricing with contract rate
inflation at +25% since mid-2020
- Fuel and inflation are two new areas to watch which are potentially adding
pressure on transportation budgets
- First Tender Accept (FTA) is hovering in the 55-60% range. That is a significant
departure from the 80% range in 2020Q1
- U.S. insurance costs continue to rise, significantly impacting carriers (mostly
niche and regional carriers)
Supply
- New class 8 orders are dropping
- Used class 8 prices continue to increase to over $70K
- The drug and alcohol database is making a larger impact than anticipated as
drivers exit and do not return
- Training new drivers is still taking longer than expected with reports of reduced
class sizes and CDL limitations at the DMV due to restrictions
- There are less drivers willing to work in teams which is impacting team capacity
- Lead time for new trucks is starting to increase again as OEM’s manage backlogs
- The supply of truck components are increasing; however, new builds are still being
impacted by a lack of components
Demand
- Demand is still strong as shippers continue to catch up after the holidays
- The realignment of industry level demand is creating significant imbalances
across national flows
- The ISM PMI index dropped below 60 indicating strong but slightly weaker
economic conditions
- RFP remains on track with expected Q1 volume albeit with an increased
willingness to take different approaches to find capacity
Labor
- The driver shortage is compounded by the continued high demand
in the marketplace
- Many drivers have left the industry permanently due to COVID-19
- Driver pipelines are still being impacted by COVID-19 including
training and certification
- Carriers are offering additional pay for drivers to relocate to areas where
capacity is needed
- Driver turnover is increasing as employed drivers chase higher pay
and signing bonuses
- There is a noticeable shift from long haul to short haul as drivers seek more
desirable work
- We are starting to see impacts to labor as the Omicron variant is still surging
Policy
- The infrastructure bill could have significant impact on supply chains
and labor sources
- Future spikes in COVID-19 infections may cause additional unknown regulations
- There are unknown driver supply and downstream impacts of administrations
24/7 port operations declaration
- The border vaccine mandate is in effect and the full impact is unknown
- Intra U.S. operations will not be impacted at this time as the U.S. supreme court
has issued a stay on the executive order for a vaccine mandate
- The administration is pushing for private businesses to ease supply chain
congestion and is trying to get workers back into the work force to support
Spot premiums remain in elevated status across all modes
Transplace analyzes our ~$15 billion of Freight Under Management (FUM), the largest shipper-carrier network in the world, to identify trends in spot and contract rates.
Take action now and plan for what's ahead
Scroll to the right to see recommended actions across all major modes and geographies.
U.S. - Full Truckload
- Focus on relationships with key service providers
- Cultivate partnerships with collaborative or integrated forecasting and
planning – and reward key partners
- Support the driver base by minimizing time at the dock and trailer turns, provide
amenities such as parking and restrooms and communicate to employees the
importance of the driver base
- Maximize lead times of order to pick up and tender loads with as much
notification as possible
- Ensure your network is optimized to run lowest miles/lowest cost and support
productivity and reduction of empty miles (TL and LTL)
- Create smoother more predictable flows through better collaboration with
vendors or customers where possible
- Maximize trailer utilization – cube and weight
U.S. - Less than Truckload (LTL)
- Focus on improving key factors that contribute to carrier operating
ratio and profitability
- Consider LTL carrier networks for flow alignment to improve pricing and service
- Implement preferred shipper best practices to streamline process and reduce
carriers cost of doing business
- Adjust transit schedule and/or ship 1 – 2 days early or ship with guaranteed
service to improve on time performance
- Improve economic order quantities to avoid LTL and/or improve utilization of
multi-stop TL’s and cross shipper collaborations
- Focus on collaborative or integrated forecasting and planning, with scheduling
flexibility
U.S. - Intermodal
- Lock in capacity with incumbent providers, especially out of the constrained markets
- Consider providers that have the ability to operate on all of the railroads so there
is flexibility to shift volume when one of the railroads experiences congestion
or service issues
- Start considering conversion opportunities for 2022
- Assist with improving equipment street dwell
U.S. - Bulk
- Ensure lead times match the market which has increased by an average of 14 days
- Closely track primary and secondary load tender acceptance and
measure cost inflation
- Consider broker usage as demand has increased due to carrier turn-backs
- Constantly monitor KPIs for service failure and cost inflation with
predefined remediation processes
Mexico - Truckload
- Execute frequent bids and rate revisions, especially focusing on strategic
partnerships and open communication with the carriers
- Be open to alternatives such as transloading in Nuevo Laredo to take advantage
of B1 capacity
- Explore alternative borders that can fit your network, as Laredo’s market
continues to rise
- Explore new modes of transportation including ocean freight
- Develop capability to secure capacity quickly and frequently
Canada - Truckload/LTL
- Ensure your routing guide does not put too much reliance on a small
group of carriers
- Work to strategically expand the number of carriers you work with factoring in not
only base rates, but service levels and accesssorial loads
- Given the uncertainty within segments of the Canadian market as well as other
concerns faced by carriers, be conscious of the timing of going to market
for carrier RFP’s
- Communicate on a regular basis with core carriers, especially swings in volumes
such as promotions
- As best as possible, stay abreast of changing market conditions, especially as
the economy rebounds and the uncertainty around such issues as the
vaccination mandates become clearer
International – Ocean & Air
- Finalize your 2022 ocean contract carriers and allocations in Q1 2022
- Plan for contingencies as pending ILWU (West Coast) labor contract negotiations
begin in 2022 with a contract deadline 6/30/22
- Diversify carrier base across alliances as disruption is projected to continue
deep into 2022
- Consider alternate ports that may have higher freight rates but less congestion
- Plan for possibilities if carriers will not provide IPI (interior point intermodal)
movements to inland rail ramps
- Develop direct relationships with ocean dray providers for capacity that ocean
carriers are unable to provide
Europe
- Understand how the EU Mobility Package will impact your carrier base and costs
- Aim to become a ‘shipper of choice’ with your carrier base to ensure continued
capacity and loyalty
- Review sourcing practices – balance cost vs. service
- Look for increased operational excellence – drive non price related cost savings:
load fill, mode selection, managing customer order quantities and routing guide
management
- Aim to lock in current contract pricing for as long as possible and avoid going to
market with tenders; extend current contracts, if possible
- Negotiate carrier requests for inflationary rate increases by understanding their
change in cost inputs (driver market, truck costs, legislative changes)
- Review lead time rules to be realistic based on the current market situation
Trailing 3-month contract baseline applied to all day van shipments, 6-months for others
Spot premiums remain in elevated status across all modes
Van contract inflation stalls in Dec 2021, Pre-Q1 weakening seen across modes