ILMA Compoundings - May 2020 - 20

He said he is trying to maximize every piece of technology
available to increase efficiency. "At the end of the day, there
is only so much that technology can do. You're moving a
product from point A to point B," he said.
Costello said electronic logging devices (ELDs) are
increasing efficiency. "Now fleets can go to shippers and say,
'I have the data. You're holding up my driver. I'm not going
to haul your freight,'" he said, adding that he thinks ELDs
have created more positives than negatives for the industry.
The trucking industry has seen a shift in the average length
of haul, which has been driven by the growth in e-commerce,
Costello said. It averaged 505 miles last year. "We continue
more and more to buy online. As we do that, the average length
of haul shrinks. You have to have goods nearby," he said.
Jeff Leiter, general counsel for ILMA, said that a lot of
ILMA members rely on just-in-time deliveries. "The one
thing that has complicated it somewhat there has been the
dramatic surge in e-commerce and online," he said. "The
issue is they're competing for space on a truck with e-commerce shipments."

CONTRACT VS. SPOT MARKETS
Shifts in capacity alter rates and spot rates have fluctuated
drastically so far in 2020. Hart said this is an unsettled
time for the spot market. "For instance, rates and volumes
rose sharply during the first three weeks of March and then
plunged well below seasonal norms entering April," she said.
There were two reasons for this. "Firstly, consumers and
supply chains adjusted to disruptions caused by COVID-19,
so the urgency to replenish inventory and secure capacity
fell significantly," Hart said. "At the same time, contract
carriers, which move freight on a schedule, have seen their
workload decrease. They are posting their trucks on the
spot market and the influx of capacity has produced some
stunning load-to-truck ratios."
Load-to-truck ratios measure the number of available
loads on the spot market relative to the number of available
trucks. "Dry van freight was below 1.0 in mid-April, a 45%
drop from what we typically see at this time of year, meaning there were more trucks on the load board than available
loads," Hart said. "Predictably, rates tumbled."
Truckload freight volumes are volatile as well, beyond
what is predictable based on historical patterns like seasonality and day of the week, Hart said. She added that producers
of lubes and fluids face the added pressure of low oil prices,
which have depressed freight volumes and rates for flatbed
equipment in places like Texas, Louisiana and Oklahoma.
"Our working assumption is that imports and agricultural
goods will play a large part in the recovery and stability of
freight volumes. Our models estimate that volumes and

MAY 2020

| COMPOUNDINGS | ILMA.ORG

rates will level off in May, but the exact timing is uncertain,"
Hart said.
FTR's Vise said the truckload spot market may hold up
a little longer because of the current level of disruption and
the imbalance in freight. He believes it won't take long for
truck carriers to start pursuing spot loads to keep trucks
moving. "We are already hearing from carriers that their
usual freight is gone," he said. "I think that is definitely happening already and is probably going to happen even more."
Vise said some carriers have indicated that they are
changing their networks on the fly, using the spot market to
reconfigure their network. "That is going to put additional
pressure on the small carriers, I think, that are already under
a lot of pressure over truck insurance going up," he said.
Costello noted that contract freight typically makes up
75% of all freight.
Hillard said some shippers stick with contracts, but others
move to the spot market when rates drop. "In a loose market,
those guys are saving some dollars, but the second the market
gets tight, like in 2018, they're going to lose their shirts," he
said, adding that BRT prefers contracts, even when freight
shifts. "On the contract, when things are loose, I'm going to
be there. When things get tight and I can go to the spot market, I'm not going to do that because I have that relationship."
"At BRT, we like to see consistency and give consistency
to our shippers," Hillard said, adding that contracts can help
shippers when freight swings the other way. "We want to
build relationships."
He added that relationships are going to be the key to
making it through 2020. "Find your friends and stick with
them," he said.
Hart said the period of uncertainty is unprecedented in
both length and degree. "Eventually infections will peak,
and an adjustment period will commence. When that
adjustment is complete, we expect a return to the seasonal
trends," Hart said.
Until then, Hart recommends shippers control what they
can. "This is one of those times when shippers and receivers
can distinguish themselves as a place that truck drivers want
to come to when they're looking for a load," she said. "Clear
communications about appointment schedules, giving
drivers a safe place to park while they wait, offering access
to clean bathrooms and providing hand sanitizer to drivers
who have to sign paperwork can go a long way toward
keeping truckers happy and securing capacity in the future."

THE INTERMODAL MARKET
Todd Tranausky, vice president of rail and intermodal for
FTR, said that intermodal is going to be under more pressure than originally anticipated coming into 2020.

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ILMA Compoundings - May 2020

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