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Mar 30, 2018

Looking ahead in 2018: the state of the logistics industry

By King Solutions  

king industry update

As the first quarter of 2018 wraps up, our shipping experts are bringing you the latest logistics numbers and industry trends. 2018 has been off to a strong start for the economy. These booming numbers, when combined with the ever-present capacity crunch, continues to limit carrier availability and increase rates.

Here’s a look at the shipping and freight numbers for the first couple of months in 2018:

Shipment volumes continue to squeeze capacity tight
December freight volumes were at near record highs, and this trend has continued through January and February. Despite a small drop in consumer spending, shipments rose to almost 1.2, a 5.9% increase over January, and an 11.4% increase YoY. Volume is growing at such a high rate because of increases in production and a strengthening economy. Real gross domestic product (GDP) increased at an annual rate of 2.5 percent in the fourth quarter of 2017, and some economists are expecting future GDP growth to exceed 3.0%, while others are estimating growth as high as high as 5.4%.

At the same time, capacity is tightening. The ATA estimates a shortage of 50,000 truck drivers, and 93% of all U.S. trucking fleets have fewer than 20 trucks. Although freight haulers added 5600 jobs in February, and driver pay and shipping rates rose to meet demand, the capacity crunch continues to loom over the industry.

A decrease in the Van Load-to-Truck Ratio
The latest DAT Dry Van Load-to-Truck Ratio, which often signals impending changes in carrier rates, took a sharp, 29% drop from the start of 2018, decreasing to 7.0 at the end of February from a record-high 9.9 in January. Although this drop is significant, the ratio is staggeringly higher than the 2017 number. February, 2018’s ratio was 180% higher than the same month in 2017.

DAT Dry Van Ratio

Diesel fuel prices continue to fluctuate slightly
At the start of the year, diesel fuel prices sat at $2.97. As of writing this, diesel fuel is at $3.01. Prices rose all throughout January, peaking at $3.09 at the Beginning of February, and have been up and down throughout the month of March.

2018 diesel fuel prices

The Cass Truckload Linehaul Index continued its YoY climb
After YoY increases in November, December, and January (up 6.3%, 6.2%, and 6.5%, respectively), the Cass Truckload Linehaul Index continued its YoY increases with a 6.5% increase from February of 2017. The index is a reliable indicator of per-mile truckload pricing, and Cass Information Systems’ pricing forecast for 2018 is indicating that rates will continue to increase throughout the foreseeable future.

Tonnage rates are also increasing, with the Tonnage index rising to a rate that is 5.7% higher than it was in February 2017. The index in 2017, when compared to 2016, was 3.7% higher, the largest annual gain since 2013.

King Solutions is dedicated to finding the best value for its clients
Although freight prices are on the rise, and new ELD mandates (full enforcement begins April 1st) are further contributing to the capacity crunch, King Solutions is working hard to find new ways to move our customers’ products quicker, more efficiently, and for the best value. We have prepared several solutions that will help counteract the capacity crunch:

  1. Investing in our team, who are tackling new areas of expertise by completing Certified Transportation Broker programs.
  2. Continuing to expand our CoastalPlus program (LTL freight and PTL solutions), bringing new advantages to MN-based shippers.
  3. Maintaining an after-hours shipping team who is prepared to share updates with customers and respond to incidents.
  4. Implementing a robust qualification program to find the best carriers for clients. We monitor everything from insurance and safety records, equipment, and other factors. Despite our rigorous expectations of carrier quality, we are expanding our network of carriers and other industry relationships to offer more shipping options and strategy.

We are committed to innovation and customer care
We are excited about the direction the industry is moving. We will continue to work hard to be the driving force behind your logistics operations, and you can always count on our team to go the extra mile for your business. If you have any questions or concerns about the state of the industry, or your shipping strategy, don’t hesitate to reach out to our team. We are always happy to discuss new solutions for your business. Get in touch with us today.

 

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