Chainalytics’ VP of Transportation, Kevin Zweier, recently joined MercuryGate’s Phil Melton for a three-part discussion on the Flatbed Trucking Market and what’s behind the sector’s current pricing trends. We bring you the inside line on their flatbed market outlook for 2021.
How can you know what’s right for your business?
In flatbed, like every other part of the over-the-road freight transportation ecosystem, you have to know what’s happening in the marketplace to map out a sensible strategy for your business. There are always many questions. Is what we see specific to us, or is it valid for the market as a whole? The only way you can know is to have some way to benchmark and gather market intelligence; consortiums, like the Freight Market Intelligence Consortium from DAT, are good tools for doing that.
Information from consortiums like DAT’s is based on real shipment data. Not generic bid data or spot rates off of load boards — but authentic movements by actual carriers, on real shipments, from legitimate shippers, across the continuums of contract and spot movements. That way, you can begin to understand how the market is moving. Do we see volume increases? Are prices increasing or decreasing? How much available capacity is out there? How deep are most people going into their routing guides? Getting a handle on these variables is essential.
So, where is the flatbed market headed right now?
COVID-19’s associated disruptions and general ups and downs have shaken up everything. How have those events affected current pricing trends within the trucking market and flatbed specifically?
The initial days of the pandemic brought with them panic buying and volume spikes as we were stockpiling foodstuffs, toilet paper, and other CPG products. Then, the economy cooled down considerably when everything shut down, and volumes dropped with it for non-essential products. Flash forward, and now we’re trying to rebuild inventory, and everything is going gangbusters.
It’s been a challenge on the flatbed side over the past few months to find the capacity to manage routing guides. It’s left a lot of shippers at the mercy of “dialing for diesels.”Kevin Zweier, Vice President, Transportation at Chainalytics
But even within flatbed itself, we saw many fluctuations during that time as well. We saw oil and gas consumption fall because many of us were staying at home and not using as many petroleum products, so that market took a big hit. Companies in home improvement made substantial gains as many people who were stuck at home got tired of looking at the same old things and were motivated to take on home improvement projects. Within industries or modes of transportation, there have been massive fluctuations in volume. On top of that is the human element, as the supply of drivers has been slow to return, impacting available capacity. So, all of that affected all the transportation markets and flatbed in particular. Perhaps even more dramatically than other sectors.
For example, the February spot rate for flatbed was the highest seen since August 2018. That’s a measure of how many loads have been out there searching for a truck. It’s been a challenge on the flatbed side over the last few months to find the capacity to manage routing guides. It’s left a lot of shippers at the mercy of “dialing for diesels,” playing the spot market, or using non-asset-based providers more than they would’ve been comfortable in the past.
Have a backup plan: engage with a broader group of carriers.
Shippers need to be very careful about consolidating down to too small a core group of carriers. It’s prevalent when coming off a reasonably soft market as we saw in 2019, which saw many shippers consolidating their carrier bases, going to a reduced number of non-asset-based and asset-based players. But, when a capacity crunch hits and your carrier base taps out, you’ll need other relationships to get the capacity that you need.
As many find to their dismay, you can’t turn on a new carrier very quickly. It’s hard to award business to a carrier you’ve never done business with before. Carrier discovery needs to be a full-time or a year-round endeavor. You need to build a trusted network of carriers before the crunch comes calling.
Yes, this makes carrier management more labor-intensive and expensive. However, the past year’s events have taught us that adverse market conditions – big or small – can happen when you least expect them. As diversification in investing protects your money and future-proofs your portfolio, the nominal costs of proper capacity and carrier diversification will prepare you for future shocks and ensure access to additional capacity when needed.
Diversified carrier networks may seem unnecessarily complex and costly to manage. However, they’re one of the most prudent investments you can make to prepare for future events. Reach out to us and see how Chainalytics can help your performance during the next “uncertainty.” Using one-of-a-kind tools and approaches like digital assets and managed analytics services, we consistently deliver actionable insights and measurable outcomes to our clients.
