Material Handling Network



December 2018 Issue

January 2019 Material Handling Directory

2018 Inserts

subscribe

Social Media Links



View Printer Friendly

Freight Flow and the Economy Q&A with Donald Broughton

Tuesday, November 13, 2018

Although freight is very strong, can you explain why the delta between asset-based carrier volumes and third-party logistics (3PL) volumes is widening as 3PL volumes have steadily decreased in the past several months whereas asset-based volumes are still extremely high?

Freight volumes still exceed capacity. I think because we are transitioning from 105-degree weather (very hot) to still warm (75 degrees, which seems cold compared to 105 degrees), shippers have fewer loads they have to use brokers for, as more of their loads are being covered by their core carriers.

 

Is driver retention having a significant effect on truck capacity? Normally, fleets average three-to-five percent unseated trucks. Increased driver pays and lower driver turnover has increased capacity: 1. By lowering the unseated truck count 2. By eliminating the lower productivity of the first few weeks of any driver (even experienced drivers are more productive after learning the new company's systems).

 

As a supplier going into RFP season, what should we expect to see in dry and refrigerated freight rates for both Full Truckload (FTL) and Less Than Truckload (LTL) for 2019?

The DAT Barometers are still at levels that would indicate higher nominal rates for both in 2019. Percentage wise it will be in the more normal (low-to-mid single digit) range, but still up slightly overall. Reefer rates have more room to go up than does dry van, and of course, it depends on how much rate increase you accepted in 2018.

 

What are your thoughts on lowering the age of drivers from 21 to 18 and how will that impact driver availability?

Do it. You could make the requirements more stringent - longer training, hair follicle test, more trainer team time, etc., but there is no evidence that older drivers are safer.

 

Will insurance companies prevent the driver age from lowering to 18 years old?

Insurance companies make money from taking risk and charging adequately for it (underwriting gains) and investing funds paid in while they are awaiting paying claims (investing gains). Expanding the pool of drivers should make insurance companies more profitable, not less profitable.

 

In the current state, contract prices are quite a bit higher than spot pricing. Some folks are calling for rate increases in 2019. How could this be possible as the gap between spot pricing and contract pricing continues to widen?

Contract prices are normally higher than spot, depending on market conditions. This year spot prices shot up above contract before falling back below. As spot prices find a floor, and where they find a floor, this will tell us much about where contract prices are headed in 2019.

 

Do you see any major signs in current freight flow that concern you about the state of the economy?

While overall rail volumes are still positive, the decline in export grain volume is indicative of what can happen as a result of a trade war. If the current trade dispute with China is not settled, or expands, it could threaten a larger number of the goods flows and become increasingly problematic for our economy.

 

Are there specific industry freight flows we should keep an eye on to better understand what is happening in the economy?

Dozens. A few worth mentioning - transpacific air freight vs. semi-conductors, trans-atlantic air freight vs. the US Dollar/Euro.

 

What is the relationship between value, density and disposability, and vice versa?

The higher the value and lower the density, the more disposable it tends to be. The lower the value and the higher the density, the more durable it tends to be.

 

Which are larger indicators of the economy? Freight flows in relation to chemicals or lumber?

Chemicals tell us about the industrial economy and lumber tells us about the housing industry. While there is some primary, secondary and even tertiary relationships between industrial and housing, primary housing is about 13 percent of the GDP, durable manufacturing is about six percent of the GDP, and non-durable manufacturing is about six percent of the GDP. The simple answer is housing by a small margin, but it is more complex than that. If you add in the positive housing can become (through increased lending activity and improved consumer wealth/perceived wealth) when it is expanding, as much as 20 percent of the GDP can come from housing.

 

What are your holiday spending predictions based on freight flows?

Freight flows are signaling a strong holiday shopping season, especially for e-commerce (which should post a sales increase in the high teens this year, from 17-19 percent).

 

Why do flatbeds have a unique relationship with electronic loading devices (ELDs)? How has it taken them this long to figure it out?

The trailer to tractor ratio is close to 1-to-1, and the driver wants to be involved in loading and securing the load. There is almost no drop and hook in flatbed, especially on the loading side. This means the loading process (and to a lesser degree unloading process) is taken 100 percent out of the driver's available drive time.

 

 

 

About Donald Broughton

Prior to starting Broughton Capital, Donald Broughton spent nine years as the Chief Market Strategist and Senior Transportation Analyst for Avondale Partners. As a Transportation Analyst, his stock-picking performance has been repeatedly recognized by the Wall Street Journal, Forbes and Fortune, among many others. A popular and entertaining public speaker, he is known for his insightful yet simple explanations of the transportation industry and its economy.

 

About Arrive Logistics

Arrive Logistics is a transportation service provider who collaborates with shippers and carriers to deliver superior brokerage and transportation management services. Co-founded in July 2014 by Matt Pyatt and Eric Dunigan, Arrive Logistics established a culture that redefined what it means to be a modern broker through their dedication to both shippers and carriers. Headquartered in Austin, Texas with offices in Chicago and Chattanooga, Tenn., Arrive Logistics gives partners more by putting proprietary technology, unprecedented operations, and customer service at the forefront of their business. In 2018, for the second year in a row, Arrive Logistics was named one of Inc. Magazine’s best workplaces due to its vibrant culture and competitive benefits, creating standout employee engagement. Visit www.arrivelogistics.com to learn more about one of the fastest growing logistics company in the U.S.

 

View all Industry News