Loadsmart Resource Center

Freight Market Uncertainty: Data and Advice for Shippers

Written by Veronica Turk | Oct 16, 2024

Loadsmart recently presented at CSCMP Edge 2024. The speaking session featured insights derived from Loadsmart's extensive freight market analytics. Also discussed were specific challenges in the market and advice for shippers looking to reduce the amount of fire-fighting they do in 2025.

Read this blog for highlights from the session, or watch the full recording here!

 

 

 

Robb Porter, President, Head of Shipper Solutions & Managed Transportation for Loadsmart

Robb Porter is an industry veteran with more than 25 years of experience leading high-performing teams at high-growth businesses within private equity-backed, publicly and privately held third-party logistics companies including Ryder, Geodis, XPO, DB Schenker, and Choice Logistics. Robb holds an MBA from the University of Florida and a BSBA in Marketing & Logistics from Central Michigan University.

 

Stella Carneiro, Senior Data Scientist and Economist for Loadsmart

Stella Carneiro is the Senior Data Scientist and Economist at Loadsmart, where she improves clients' logistics operations by providing actionable insights into the trucking landscape. She is responsible for Loadsmart's freight rate forecast and the publication of monthly market updates. She holds an MRes in Economics from the University of Warwick. Prior to joining Loadsmart, Stella worked as an international consultant at the World Bank.

 

Patrick Aragao, CEO of Aragao Consulting, Inc.

Patrick Aragao, CEO of Aragao Consulting Inc., offers over 17 years of expertise in Supply Chain Logistics, Warehousing, Planning, and Transportation. Known for his results-driven approach, Patrick has consistently optimized global supply chain processes and driven operational excellence. He specializes in leading strategic initiatives that enhance efficiency, reduce costs, and modernize processes. With a strong proficiency in data and advanced analytics, he delivers valuable insights to simplify and streamline complex supply chain systems.

Freight Market Data and Forecasting

Most shippers these days are uncertain about what lies ahead. To put some predictability into an uncertain market, shippers can rely on data. Stella Carnero opened the discussion with an in-depth look at how Loadsmart calculates our drive-in rate and how we forecast future market trends using advanced data models.

Calculating the Drive-In Rate

Loadsmart focuses on the top 30 regions in the U.S. to determine the drive-in rate. This captures the most active freight markets and paints the best picture. These top 30 regions are the most active regions in the freight market, drive-in-wise, and include Southern California, East Texas, and the greater Lake Michigan area. The rates from these regions provide a comprehensive snapshot of the freight market’s health. Loadsmart then benchmarks these rates against Sonar’s Outbound Tender Rejection Index (OTRI), showing a "very high" correlation and validating the calculations.

Freight Rate Forecasting

LoadSmart’s internal forecasting model combines historical rates with macroeconomic data to predict future trends. “Our model includes the historical rate back from 2017 and macroeconomic indicators such as consumer spending, imports, and industrial production,” Stella noted. In addition to this internal data, Loadsmart uses official projections from government agencies like the Congressional Budget Office (CBO) and the Energy Information Agency (EIA). This multi-faceted approach allows LoadSmart to create highly accurate rate forecasts that help shippers plan for the future.

Peak Season Pull-Ahead

One of the major trends Stella highlighted was the phenomenon of "peak season pull-ahead." Many retailers are worried about potential strikes and changes to import tariffs and are choosing to build up their inventories earlier than usual ahead of the holidays. “December is the exception... because of Black Friday and Christmas week, where we expect to have some pockets of tightness,” she said. This early inventory build-up means that much of the demand that typically drives Q4 rate spikes has already been absorbed in Q3.

  • Rates are expected to mirror last year's trend, peaking in the 3Q before declining by 2-5% in 4Q
  • The steady rise in consumer goods shipments in July and August, which has pushed rates higher, suggests we may be seeing a peak season pull-ahead similar to last year
  • Peak season pockets of tightness: Black Friday and Christmas weeks we expect rates to rise ~7% WoW

Carrier Market Shifts

Looking ahead, we project that more carriers will exit the market as contract rates drop below the break-even point. “We're seeing shippers pressure contract rates below what we consider the break-even price of $2.30 per mile,” said Stella. “I believe this will eventually lead to more bankruptcies by the end of 2024. In 2025, as we finish this exodus in the first half of the year, the market will migrate to a more balanced state, with supply and demand stabilizing. At that point, we might be ready for an upcycle."

  • With spot rates rebounding in Q3, shippers with locked contracts are paying less to move their freight for the first time in almost two years
  • However, we expect this difference to remain minimal and even reverse if we have a flat market in the Q4
  • Shippers are looking to lock in rates for the 2025 bid season near market lows and in an environment where capacity remains abundant

Strategic Advice for Shippers: Insights from Patrick Arago

Patrick Arago offered practical advice for shippers facing market uncertainty. His key message: focus on agility, collaboration, and leveraging the right tools to manage costs and stay resilient.

He highlighted the difference in how large enterprises and mid-market companies manage their supply chains. Large corporations often have access to a broad talent pool and advanced technology, giving them an edge over smaller players. He noted that many mid-market companies are often more nimble and agile, but often use more reactive processes.

Key Success Factors

Patrick outlined three critical factors for shippers to consider in today’s market:

  1. Cost Containment: Shippers should focus on optimizing costs and leveraging data to make informed decisions.
  2. Resilience: Building resilience is essential for managing capacity in a tight market. This includes balancing dedicated fleets with spot market contracts to ensure coverage during uncertain times.
  3. Data-Driven Decisions: Patrick stressed the importance of data in decision-making. "We are in the decade of data," he said, encouraging shippers to use data not just to analyze past performance but to make forward-looking decisions.

Patrick recommended mid-market shippers partner with technology providers to bridge the gaps in expertise and resources. “Sometimes you need someone that has already this available in their ecosystem,” he said, suggesting that shippers leverage partnerships with brokers, TMS providers, and tracking solutions to access the tools they need without heavy investment in proprietary technology.

Shippers need to find cost-effective, scalable solutions to collaborate with technology providers that can help them manage uncertainty efficiently.

Managed Transportation and Technology

To conclude the session, Robb Porter provided insights on how managed transportation services and technology solutions can help shippers navigate today’s fast-changing market.

Flexibility and Optionality

The days of massive, all-or-nothing TMS implementations are behind us. Today, shippers are looking for flexible, scalable solutions that can address specific pain points. “Rarely do we have engagements where shippers come with a prescribed buying intent,” Robb explained. “It’s not, ‘I’m here to replace my TMS.’ It’s usually, ‘I’ve got the following pain points. How do we figure out how to go solve those problems?’” A managed transportation provider can help craft a bespoke solution that fills a unique business’s specific logistics needs.

Tailored Solutions for Mid-Market Shippers

Mid-market shippers often need agile and cost-effective solutions right away. Frequently, private equity firms and portfolio companies turn to managed transportation providers when they need to quickly optimize transportation for struggling brands or new, fast-growing companies.

According to Robb, “The challenge is how to navigate this... What is the right technology solution? How do I augment and scale the business?” He emphasized the importance of finding the right technology to complement existing operations. There’s no need to completely tear down existing, working processes when a complimentary or supplementary option is available. This can help with change management and gaining stakeholder buy-in.

Leveraging Advanced Analytics and AI

Robb also highlighted the fact that advanced analytics through transportation management systems and AI-driven logistics solutions are now available even to smaller companies, not just enterprise shippers. “The days of massive deployments for TMS or outsourcing the entire function are over,” he said. Instead, shippers can now leverage niche, complementary technologies like advanced analytics, generative AI, and data-driven optimization tools to improve their operations without the high costs or long timelines traditionally associated with full-scale technology implementations.

Bridging Uncertainty with Data, Strategy, and Technology

In an uncertain market, shippers need more than just raw data—they need strategic advice and cutting-edge technology to navigate challenges effectively. By focusing on these three key areas—data, strategic partnerships, and advanced technology—shippers can better position themselves to thrive in the volatile freight market expected in 2025 and beyond.