The past year started with some solid tailwinds as the economies of the United States and Canada appeared to be in a growth mode. Then a number of unexpected events took place that changed the trajectory of the year. Here is our synopsis of the major freight transportation stories of 2015.

The Collapse in Energy Prices

The rout in oil prices began in late 2014 as Saudi Arabia stood firm in its insistence not to cut production quotas. The downturn in China’s economy produced less demand as oil supply remained at pre-downturn levels, a recipe for low oil prices and other challenges throughout the year. This had a huge impact on Canada’s oil sands companies, producing significant layoffs. There were also spillover effects in other energy sectors such as coal mining. The latter experienced very large price drops and decreased shipping volumes.

The steep decline in fuel and oil prices has, in turn, been a boon to freight transportation and logistics services providers primarily in the form of lower operating costs, while at the same time tremendously aiding carriers and providers serving retail-based customers, as lower fuel prices have dramatically impacted the amount of discretionary income consumers have.

Railroads that took advantage of the big increase in crude oil by rail activity were nimble enough to dodge and weave through and around commodity specific hurdles thrown up in their paths. Since the vast preponderance of this freight now moves in unit trains, the rails have developed the ability to quickly adjust by matching revenue reduction with largely corresponding cost reductions.

North America Begins to Address Climate Change

Both Canada and the United States have finally taken this issue on as a priority item. It is not surprising since the future of our planet depends on addressing global warming.

High-level negotiations on an international agreement to fight global warming are scheduled to conclude Dec. 11. outside Paris in Le Bourget. The event is formally known as the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCC). The participants hope to produce a legally binding plan to keep global temperatures from rising more than 2 degrees Celsius (3.6 Fahrenheit) from pre-industrial levels. Without this minimum step, the planet will face worsening droughts, storms and floods, according to a consensus among climate scientists.

Representatives from 196 nations, including dozens of world leaders such as President Obama, Canada’s Prime Minister Trudeau and China’s President Xi Jinping (whose countries are among the biggest emitters of greenhouse gases blamed for the warming trend). Thousands of delegates, politicians, business leaders, scientists, environmental activists and journalists will also be at the summit. The conference will review the reductions in emissions of greenhouse gases (carbon, methane) that each country has pledged to achieve by 2020. The United States and China, which emit these gases from burning coal, oil and gas, have promised to shift their industries to green, low-carbon fuels. The outcome of the conference could have lasting effects on both shippers and carriers.

The US and Canadian currencies go in opposite directions

Canada’s heavy dependence on raw material exporting, in particular, the exporting of products from the oil sands took a heavy body blow in 2015 as a result of the decision of the oil cartel. The US dollar has increased sharply against many countries including Canada, its closest neighbor. A year ago the US dollar was worth about $1.13 Canadian; today it worth over $1.32. This has had a number of consequences including a drop in NAFTA activity and a shift in the north/south flow of goods and services as always happens when the currencies change in value.

The Freight Industry Consolidates in New and Unexpected Ways

When UPS announced plans in late July to acquire Coyote Logistics for $1.8 billion, some logistics consultants and Wall Street analysts were befuddled. “Buying Coyote is an indication that they (UPS) see no significant growth in their core business of parcel,” said Satish Jindel, president of SJ Consulting Group. Some pundits seem to miss the fact that the goal for UPS in any transaction in the United States is to tap into the largest area of the transportation market to which it currently has little exposure and do so in a non-asset-based fashion. The company can’t grow in parcel or LTL much anymore via acquisition. More importantly, this gives its customers access to more TL services, which is a key ingredient that’s been lacking. TL is the biggest mode of transport in the U.S., and UPS did not have a solution for large shippers.

The issue of whether to own or not own assets is the question facing third-party logistics and transport operators in a world where the supply and cost of shipping capacity, on land at least, is increasingly uncertain. XPO Logistics believes the answer is to do both. The fast-growing, diversified logistics operator spent about $6.5 billion in to buy two logistics companies with substantial assets — U.S.-based Con-way and Europe’s Norbert Dentressangle. Con-way owns the second-largest U.S. less than- truckload carrier, Con-way Freight, and a large truckload carrier, Con-way Truckload. The former, Norbert Dentressangle, already rebranded as XPO Logistics, owns 7,700 trucks in Europe and leases another 3,200. Con-way’s trucking operations boast a combined 12,100 tractors and 33,300 trailers. “The acquisition (of Con-way) will add significant ground transportation capacity to our network and will give us a more blended model of brokered, owned and contracted capacity,” Bradley S. Jacobs, XPO chairman and CEO, told equity analysts during a Sept. 10 conference call.

Clearly 3PL consolidation, similar to core carrier consolidation seen for a number of years in the trucking space, is in full swing in the 3PL world, as shippers look to trim the number of service providers. Those with best systems, service, and scale could be the winners.

Effective Management of Truck Capacity and Driver Capacity Became a Recipe for Improved Profitability

Supply and demand were a bit looser in 2015 as compared to 2014. While business was still good, gone were the very good spot market rates that were available in 2014. 2014 was a unique year during which supply chain disruptions were commonplace across America. Partially offsetting the sequential weakening of supply and demand tightness from 2014 to 2015 were several secular trends. The first relates to a slight change in behavior on the part of asset-based carriers (particularly the large ones) to allocate ever increasing amounts of their stagnant (i.e., not growing) capacity to large retailers and large e-commerce companies.

For truck operators, the ability to command capacity and use it efficiently and effectively was the key to profitable growth this year and likely beyond. Truckload carriers in general are benefiting from a strong rate environment, and low diesel prices. They have had more miles per truck, a better rate per mile, and lower fuel costs. Shippers observed that capacity was more balanced than a year ago, in the aftermath of the disruptive polar vortex cycle of winter storms. “We haven’t had much trouble getting trucks yet,” stated Candace Holowicki, director of global transportation and logistics for diversified manufacturer TriMas.

One of the keys is to improving a carrier’s competitive position is to invest in the right kind of technology focused on asset utilization and driving efficiency in their networks. Senior executives at many trucking companies are employing more technology and data analytics now than even a few years ago.

The Big Get Bigger in the LTL and Truckload Sectors

That growth spurt underscores widespread improvement in a U.S. economy that had been limping rather than sprinting toward recovery from the economic collapse of 2009. In fact, the trucking revenue data supplied by SJ Consulting provide solid evidence that the U.S. economic recovery seen last year in increased employment numbers and higher growth in gross domestic product is real and is creating loads of freight and demand for trucking.

The 9.1 percent jump in revenue was the best performance for the Top 25 LTL carriers since 2011, when they increased combined sales by 12.4 percent. The less-than-truckload renaissance is well underway. The combination of YRC’s dramatic downsizing over the past decade, the shortage of truckload capacity, the restoring of manufacturing and the need for last mile delivery of items not easily packaged and conveyorized has reversed the decade’s long secular decline of the less-than-truckload market.

The largest U.S. truckload carriers enjoyed much stronger growth in 2015, aided by solid economic expansion, several mergers and acquisitions and mounting pricing power. The 25 largest U.S. truckload carriers increased their combined revenue by 8 percent to $27.8 billion last year, according to The Journal of Commerce’s 2015 list of the Top 25 TL Carriers, prepared by SJ Consulting. That compares with a 0.6 percent increase in 2013, when those truckers had $25.7 billion in sales, according to SJ Consulting.

Despite a Mediocre Economy, Shippers Chose to Pay More Now for Space they May Need Later

Expectations for freight growth slumped to a five-year low as economic headwinds intensified late in the year. Defying economic gravity, contract trucking rates have been rising (until recent months) despite slower than expected U.S. economic growth as shippers pay higher rates now for guarantees of available capacity tomorrow. Much of the increase has been going to pay higher driver wages and benefits, as truckload carriers large and small struggle to find and keep the truckers needed to keep their customers’ freight moving and expand their businesses.

Shippers and Carriers Start to Talk

U.S. and Canadian shippers this year enjoyed a breather from the frenetic pace of demand and tightening over-the-road truck capacity that drove rates higher much more forcefully in 2014. More carriers are now charging for excess equipment detention and other accessorial charges. Some shippers are willing to work with carriers to enhance equipment turns and equipment utilization to the mutual benefit of themselves and their carrier partners. Shippers also are benefiting from low fuel prices, which depressed fuel surcharges. In some cases, shippers reported paying lower overall costs despite higher base rates, thanks to lower fuel prices. Higher fuel prices put more pressure on transportation costs and budgets.

“We don’t really have a driver shortage problem, we have a capacity utilization problem,” reported a PeopleNet executive. Time, in trucking, really is money, and also capacity. Drivers unable to fully use the hours available to them can’t complete as many turns per week, effectively taking capacity out of the market. And most drivers, PeopleNet concluded, can’t run out the clock. That is why much of the blame has been placed on shipper and consignee delivery windows. Drivers have been getting to destinations early (to meet delivery windows) and then kept waiting. Some fleets are going back now and saying, ‘Let’s shorten that delivery window’” so drivers that arrive on time can load or unload and get back on the road.

Many other events or factors cut into driving time. Congestion is a major problem, especially in heavily populated urban areas, where much freight is delivered. Truck maintenance, fueling, weigh stations and inspections also cut into driving time, as can weather. Detention at shipper or consignee docks, however, is an issue that can be addressed through collaboration.

The Rails take a Step Back

In the 18 months since the devastating 2013-14 winter wreaked havoc on rail service, the North American supply chain has been subject to increasingly frequent rumblings that major U.S.- and Canadian-based railroads would lose hard-won domestic intermodal business back to motor carriers. Railroad executives initially were quick to dismiss such assertions, saying intermodal rail was such a sticky product and truck rates could only jump on ever tighter capacity that shippers would be willing to ride out the storm until service returned to mid-2013 levels.

But service didn’t recover measurably, and fuel prices plummeted, giving motor carriers another opening to snatch loads lost to the tracks. Still, rail executives kept to their script, telling investors that intermodal rail was winning out over trucking in key lanes. But with carload volume, particularly coal and crude oil shipments declining and railroads’ enviable profit growth slowing, the tune has changed. The acknowledgement was shared during earnings calls that intermodal has lost share to truck reflects not only the dynamism of surface transportation but a rare case in which railroads must step up their game or lose valuable business.

What a year! Happy Holidays to everyone and thanks for reading my blog.

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).