A 2019 Logistics Overview and A Look Ahead to 2020

2019 has caused a thinning out of some of the transportation companies and caused the remaining firms to continue to evolve, grow, and adjust to the changing climate. An article from Transport Topics stated that “More trucking firms have shut down during the first six months of 2019 than in all of 2018.” Many companies couldn’t stay in business due in part to tariffs, regulations, and increasing costs.

We summarized some of the headlining industry changes in 2019 and what lies ahead for 2020…

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REGULATORY CHANGES:

Transportation companies continue to face increasing regulations.

  • The FMCSA released the proposal to make changes to its hours-of-service rules in August. The HOS rules were intended to allow for more flexibility for the driver without increasing the maximum time a driver is allowed to spend driving.
  • The electronic logging device (ELD) rule took effect two years ago but December of 2019 was the final date for 100% compliance. They recently published a press release reminding carriers of the deadline and that there “will be no soft enforcement grace period.”

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ECONOMIC RISKS:

  • The main risks for transportation companies are the same ones that could derail overall economic growth–global trade wars and higher interest rates. A further escalation of the U.S.-China dispute would slow economic growth and hurt certain transportation sectors more directly (shipping is the most exposed).
  • The other key risk to transportation companies, higher interest rates, affect economic growth, the capital markets, and–more directly–companies’ interest expense. Transportation companies use large amounts of debt and they are probably ready to handle rising rates as long as they don’t increase too sharply.

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DRIVERS:

Looking at the trucking side of the logistics industry, there has been a major stalling point for the last two years: Too much freight and not enough drivers, which is both good and bad for the industry as a whole. This is good in the sense that the U.S. economy is still robust. The bad news is that carriers have been struggling to recruit and retain quality. Unfortunately, as 2019 comes to an end, more of the same can be expected for the remainder of the year.

The Morgan Stanley Truckload Freight Index (TLFI) said, “we expect TL companies to focus on potential market tightening in 2020 this earnings season given supply side rationalization catalysts on the horizon, including the Drug and Alcohol Clearinghouse and insurance rate spikes, as they continue to grapple with a currently tough operating environment.” Their sentiment survey showed an overall negative outlook regarding rates and supply.

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Looking Forward into 2020

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DRIVER SHORTAGE:

The truck driver shortage has been a serious issue through 2019 and is expected to continue causing issues well into 2020. One reason it has been so difficult to recruit and retain quality drivers is the demand for salary increases. Good drivers expect to see salary increases of as much as 20% to 50% over what they were paid just a few years ago. You can expect to see a major jump in driver recruiting efforts, going so far as the government lobbying to lower the commercial driving age to 18. Fleet carriers will put pressure on insurance companies to take a risk on these non-traditional, younger recruits in order to relieve the pressure. The FMCSA’s Entry-Level Driver Training (ELDT) regulations go into effect in February of 2020. Their intent is to raise the professional standards for new drivers with new training requirements. This training requires aspiring drivers to complete a curriculum of basic working knowledge and behind-the-wheel (BTW) instruction with one of the FMCSA’s registered training providers. This could result in more fully-trained drivers and help combat the shortage.

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CLAIMS:

The good news is that fatalities due to crashes have decreased in the last decade, however, there have been more crashes resulting in severe bodily injury. While this data may seem conflicting, the reason is because of increased speed limits and the increasing use of safety equipment in vehicles. The high dollar amounts for these severe crash claims have taken the insurance industry somewhat by surprise and these increased costs will undoubtedly be passed onto the carriers in the form of higher premiums and deductibles in 2019 and 2020.

The growing cost of insurance and claims litigation will only increase the pressure felt by carriers to reduce the crash frequency, avoid litigation and improve DOT compliance. ISS scores, drivers, maintenance and ELD equipment will be a major focus for insurance carriers in 2019 and 2020. “Best-in-class” carriers that are DOT compliance will likely try alternatives like member-owned insurance captives and risk retention groups, which can help ease premium and deductible costs.

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REGULATIONS:

Legislation changes could increase trucking costs. Though more and more carriers are independent truck drivers, it is facing more and more public scrutiny and legal issues. The California State Supreme Court ruled that any independent contractor must be able to pass an “ABC Test,” with what many consider an unreasonably high standard in an effort to discourage using these independent drivers. New Jersey is also scheduled to review a similar bill. These state legislations could start happening in more states and cause problems for owner-operators and potentially increase trucking costs in the affected states.

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CAPACITY:

Inevitably, the freight capacity overloads the transportation industry has been stuck in the past few years will find a balance before too long. You can expect that when supply and demand do eventually balance out, the trucking industry profitability will slow down considerably and there will be a difficult struggle between insurance underwriting and the ability of fleet operators to pay increased premiums and deductibles. Until then, the major players in the transportation logistics industry will continue to grow and turn a nice profit in the meantime.

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About Us

Westgate has 36 years of consistently delivering expertise in handling specialty loads, maintaining a large network of resources, and exceptional personal service. Westgate’s commitment to growth and providing exceptional solutions for our customers’ transportation needs are what will carry us into many more years of service.

See for yourself why businesses are depending on Westgate to improve their shipping processes and to keep them informed of industry trends. Reach out to us to experience our boutique approach to streamlining logistics through an extensive network of resources, trained brokerage experts and unique personal service.

Sources:

https://www.cvsa.org/news-entry/dec-17-2019-eld-compliance-deadline/

https://www.ttnews.com/articles/2019-trucking-company-closures-so-far-have-doubled-all-2018

Check out our Freight Pallet Packaging Guide!

Less than truck load (LTL) shipping can be an extremely efficient way to move shipments when you don’t need to fill an entire trailer. However, if the LTL shipping process is not implemented well, it can have some potential disadvantages, costing the company more time and money than necessary.

Packing pallets correctly for shipment is a serious safety issue as well and could be full of risk if the business isn’t careful. If your pallet isn’t stacked properly, you risk damaging the product, injuries from toppling pallets or workers tripping over the overhang, and time lost trying to fix the improperly packed pallet.

In this guide, we explain how you can avoid injuries, damage, and claims with a few industry proven tips.

It’s important to consider the following:

    • Pallet, skid, or crate?
    • Proper stacking
    • Shrink wrapping technique
    • Thinking you don’t need help

 

 

PLUS!

We included some ways to avoid common LTL shipping mistakes you could be making that hinder productivity and negatively impact the bottom line…

 

DOWNLOAD your free copy now!

 

Reach out to us for a complimentary review of your packaging to see how we can help optimize your freight processes.

Mid-Year Logistics Insights Webinar Recap

We’re happy to be able to offer you the opportunity to re-watch this incredible webinar featuring industry expert, Noël Perry. Watch and learn about some key trends impacting 2019  & 2020.

 

Webinar Highlights:

  • How do truckloads follow the stock market trends?
  • GDP Growth Outlook for 2019 based on trends
  • Is there really a driver shortage or an inability for the industry to rapidly adapt to new changes?
  • What is happening with spot prices? Contract prices? Which is recovering better and which is past their peak?
  • 2020 Vision: How many more years do we have left in this recovery? Why does the data make Noël nervous?
  • Disruptions you may see over the next 10 years:
    • The future of delivery times
    • Automated trucks and warehouses
    • Digital tools and controls

 

We’d like to thank all of the attendees for participating in this webinar, as well as Noël Perry for his incredibly informative presentation. Noël’s research and extensive knowledge on the freight industry have allowed us to gain much insight from the information he has presented.

Through Westgate’s long time involvement with and support of the Transportation Intermediaries Association, we have had the pleasure of becoming familiar with Noël and his predictions.  Every April, we attend the annual TIA conference and in my opinion, Noël’s Economic Outlook presentation is the highlight of the educational sessions. He has unique presentation skills and a passion for the industry that grabs the attention of the audience and keeps them on the edge of their seat.

Recently, we have been fortunate to get even more exposure to Noël and his crystal ball…not only as Chief Economist for the TIA, but through his partnerships with Truckstop.com and his Transport Futures newsletter which we read religiously every week.  Noël’s insights and predictions have been extremely beneficial to Westgate with regard to giving us a pulse on the future of the freight world, technology tools to consider and what to prepare for in coming years.

These are the reasons that Westgate wanted to offer this beneficial webinar to our list of contacts. Immediately following the webinar, we have received so many emails , calls, and comments telling us just how much the attendees enjoyed and appreciated the opportunity to participate in this webinar and be privy the information Noël shared. The information, data, and statistics Noël covered is truly invaluable both to us and all of the people who attended this webinar.

How’s It Hauling In 2019?

Capacity, economic growth, and what the experts say…

2018’s strong growth in the beginning of the year trailed off a bit as the year went on. The fourth quarter experienced a bit more of a boost than the normal holiday demand due to concerns of the upcoming tariffs and shippers trying to get ahead of this additional expense. The Chinese tariff was supposed to go into effect January 1, 2019 but has been delayed for 90 days to allow for more negotiations. Even with this end of the year slight surge, 2018’s freight demand ended lower than at the beginning of the year.

As Noël Perry, principle of Transport Futures and chief economist for Truckstop.com, said in his Transport Navigator analysis, “2018 started at a VERY high level but gradually and steadily declined as the year matured. Declined may be too strong a word because the market is still relatively tight.”

For carriers, 2019 may seem slower when comparing it to the frenzy we experienced in the beginning of 2018. For shippers, they can look for potential easing capacity issues, but there are still more loads than trucks in most lanes according to DAT. We are not out of the capacity woods yet.

American Trucking Associations’ Chief Economist Bob Costello also expects continued, but slower, growth in demand for freight hauling in 2018. He said, “We have hit the peak in the current freight cycle,” Costello said.

“The economy is still growing, just not as fast as it has been in 2018.”

 

Positive Indicators to Watch:

• Unemployment levels remain low and personal income is rising which could lead to increased spending.
• There is wide support for FMCSA’s proposed Hours of Service (HOS) changes which could alleviate some of the drive shortage by attracting more drivers to our industry.

 

Negative Indicators to Watch:

• Many economists warn of continued market and economic volatility in the first half of 2019. This can cause a depressed freight demand.
• Even though we listed the HOS changes as a positive, we expect a continued driver shortage while we wait for improved regulations to reinvigorate the appeal of the profession.

 

Reach out to us to experience our boutique approach to streamlining logistics through an extensive network of resources, trained brokerage experts and unique personal service.

 

GET A QUOTE

 

Noël Perry, has been provoking the transportation market for more than forty years. You can subscribe to the Transport Navigator at www.transportfutures.net

 

 

SOURCES

https://transportfutures.net

https://www.dat.com/blog/post/rates-rise-but-gains-may-be-temporary

https://www.ttnews.com/articles/infrastructure-trade-loom-large-trucking-new-year