A little over a year ago, I wrote a blog entitled “How do you know when it is time to conduct a freight bid?” (http://www.dantranscon.com/index.php/blog/entry/how-do-you-know-when-it-is-time-to-conduct-a-freight-bid ). In that blog, I outlined a set of general conditions that shippers can use as a guide to reach this decision point. Half way through the first quarter of 2017, I find myself thinking about this issue again. Here’s why.
The stock markets in North America are hitting record levels on an almost daily basis. Usually this is a sign of good economic times ahead. The US Consumer Confidence Index in December of 113.7, reached its highest level since 2001, a sure sign that people are ready to open their wallets and buy things. The National Purchasing Manager’s Index increased to 54.7% in December 2016, an increase of 150 basis points over the previous month and the 91st consecutive month for growth in the overall US economy.
The Shippers Conditions Index for October 2016 increased to a neutral reading of 0.4. FTR, an American transportation consulting service, expects that shippers will see a couple more months of neutral market conditions before they may be impacted in the latter half of 2017. The impact would in part be due to potential capacity issues stemming from the Electronic Logging Device (ELD) implementation scheduled for the end of 2017.
ACT Research’s For-Hire Trucking Index sees freight rising faster than capacity, increasing the gap to levels not observed since 2014. January freight volumes for TransCore’s Link Logistics continue an upward trend after a surge in freight volume in December 2016. Although the record for highest load volumes for January was set in 2014, last month’s load volumes are the second highest recorded for the month of January, and compared to last year load volumes have leaped 43% year-over-year.
The DAT North American Freight Index dropped in January, but was 56% higher than January 2016, according to DAT Solutions, which operates an on-demand exchange for spot freight. Intermodal loads made some positive gains as 2016 came to a close, according to FTR’s December Intermodal Competitive Index. The index -- tracking factors like truck capacity, fuel prices, rail service and intermodal rates -- was in “reasonably positive territory”, the analysts say, and rates are expected to improve in the coming months.
Of course, despite the first month of chaos in the White House, one must remember that Donald Trump campaigned on a “business friendly” election platform. Mr. Trump, the candidate, promised to scale back regulations, to repeal some of the Dodd Frank banking legislation, and to create more manufacturing jobs in America. This week President Trump met with Prime Minister Trudeau of Canada and promised to make some “tweaks” to NAFTA but not harm the significant trade activity that takes place between the United States and Canada.
Certainly, these are all very positive indicators. Clearly, there is some positive economic momentum in the United States that was created last year that has carried over into 2017. In Canada, there are some encouraging signs in the energy sector. If the essence of the NAFTA trade deal remains in effect, this will be a great relief to Canadians.
Of course, what goes up can and will go down. While there will surely be a correction in the stock markets in the coming weeks or months, there are several positive developments that will boost the economies in Canada and the United States. From a freight transportation perspective, there is a distinct possibility that capacity will tighten as the ELD mandate is implemented throughout the United States. This suggests that the trajectory for freight rates is likely upward in 2017.
The Bottom Line
Those companies thinking about conducting a freight bid in 2017 should take this initiative sooner rather than later. Shippers may face some major headwinds during the latter months of the year.
For shippers who don’t have the skills or resources to do the work internally or carriers that need help in responding to freight bids, feel free to contact me at dan@dantranscon.com. To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).