Tim Lefkowicz is a managing director in the transportation and logistics practice of AArete, a global consultancy specializing in data-informed performance improvement.
Sean Maharaj is a vice president in the Global Transportation Practice of the management consultancy Kearney. Additionally, Maharaj is a chief commercial officer of Kearney’s Hoptek.
The state of the trucking market in 2016 and the early part of 2017 offers a potent reminder that, while the United States still ships 80 percent of its cargo on trucks, the industry has some ground to make up following the last recession. In some respects, the market may appear to be healthy, especially over the long term. But when compared to prior years, the growth rate seems to be slowing. This was especially true in 2016, when available loads and opportunities dried up, capacity was "loose," and freight rates softened aggressively.
Data from the American Trucking Associations' (ATA) most recent American Trucking Trends indicates a year-over-year decline in revenues to $676.2 billion in 2016, from an all-time record of $719.3 billion in 2015. On the positive side, 2016 witnessed gains in truck sales as well as in the number of truck drivers employed.
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[Figure 1] ATA trucking tonnage index (seasonally adjusted; 2000 = 100)Enlarge this image
Truckload: Rates continue soft That excess capacity forced many trucking companies to engage more fully with the truckload spot market. Some carriers that generally refrain from participation in that segment found themselves scrambling for freight and revenue, and therefore were forced to enter that market. Although rates typically are discounted by up to 30 percent on the spot market, in 2016 discounts were as deep as 65 percent in some cases.
Current analysis by the online freight marketplace and information provider DAT Solutions shows that spot rates remain stagnant even though more shipments are moving across the country. In addition, the Cass Truckload Linehaul Index, which many transportation industry executives and analysts consider to be the most accurate gauge of freight volumes and market conditions, shows that 2016 rates tracked somewhere between those of 2014 and 2015 for most of the year. For the last four months of 2016, however, motor carrier rates were nearly aligned with 2014 levels. For 2017, the index shows that rates began the year in line with 2015, only to dip below those levels during the second quarter.
This type of softness indicates that carriers are still having a hard time charging sustainable rates, and that shippers continue to dictate the terms in the marketplace. Indeed, although the Cass Index initially forecast annual growth of 3.1 percent for long-distance freight in 2017, that number was revised downward at mid-year to no more than 2 percent.
All of this suggests that the truckload market is grappling with muted freight demand. Essentially, there's still too much capacity chasing too little cargo. This is one of the main reasons the truckload market will likely continue to experience turbulence, with rates remaining at historically low levels and more consolidations taking place. While this situation is a negative for motor carriers, it does translate into better opportunities for shippers to lock in favorable contract rates.
LTL: A bright spot While the truckload market faces uncertainty and turbulence, the forecast is more positive for less-than-truckload (LTL) providers. LTL data hasn't yet been completely compiled, but initial evidence indicates the first half of 2017 turned out better than expected. That's primarily due to a robust second quarter that saw an increase in tonnage built on the back of several quarters of positive industrial economic data.
This growth in tonnage can be seen in ATA's seasonally adjusted Trucking Tonnage Index, which tracks the amount of freight moved by the for-hire trucking industry, including both truckload and LTL. (See Figure 1.) May saw a 6.5-percent bump over April and was up 4.8 percent compared to May 2016. This puts tonnage nearly back in line with volumes seen at the start of 2016. However, on a year-to-date basis, tonnage is only up nine-tenths of one percent.
While the single-month changes in May are not a concrete indication of a trend, they do seem to corroborate a general feeling across the industry that we will see low to moderate growth for the overall industry over the remainder of the year. Analysts anticipate that the truckload segment will remain sluggish and the LTL segment—an early indicator of economic activity such as construction—will see most of the growth. Only time will tell.
Disruptive technology and ongoing trends Some of the unpredictability and rate softness we are witnessing in the trucking industry can be attributed to technological innovations and other disruptions, such as online trucking marketplaces, the growth of Amazon's business across a variety of sectors, and a growing propensity among consumers to shop online. For instance, Uber-like applications have promised to marry shippers with available freight capacity. One example is the startup Next Trucking, which is billed as a truck-centric online marketplace that will connect shippers and motor carriers in real time. Waiting in the wings are potential providers like Amazon that, given their sheer size and buying power, have the ability to create a similar marketplace for shippers to buy transportation services from them.
Driverless trucks are another disruptor to consider. Some believe this level of automation won't be realized on a wide scale until perhaps 10 years from now. But driverless solutions like Uber's Otto and others could come online faster than expected. Once they are widely available, they could dramatically change how trucking companies respond to some of the ongoing struggles of the last few years, such as driver shortages.
Depending on what type of shipper demand they serve, trucking companies will have dramatically different experiences and related economic considerations in the coming years. As we've seen, the LTL market is showing positive signs of life. The truckload market, meanwhile, will continue to deal with its own set of concerns for the foreseeable future. The resulting rate softness means that truckload is currently a buyer's market for shippers and is likely to remain so for a while.
Shippers who have been down this road before know that this rate window may not remain open forever, and that they have an opportunity to make good on some of their own cost-savings goals in the near term. From a business management perspective, meanwhile, truckload carrier executives will need to have a disciplined plan for realizing cost savings while paying attention to operational efficiencies and technological innovation. This implies making investments across a range of areas—something that has typically eluded players in this long-standing and indispensable service industry.
“Consumers pulled back in January, taking a breather after a stronger-than-expected holiday season,” NRF President and CEO Matthew Shay said in the report. “Despite the monthly decline, the year-over-year increases reflect overall consumer strength as a strong job market and wage gains above the rate of inflation continue to support spending. We’re seeing a ‘choiceful’ and value-conscious consumer who is rotating spending across goods and services and essentials and non-essentials, boosting some sectors while causing challenges in others.”
Total retail sales, excluding automobiles and gasoline, were down 1.07% seasonally adjusted month over month but up 5.44% unadjusted year over year in January, according to the Retail Monitor. That compared with increases of 1.74% month over month and 7.24% year over year in December.
Likewise, the Retail Monitor calculation of core retail sales (excluding restaurants in addition to automobile dealers and gasoline stations) was down 1.27% month over month in January but up 5.72% year over year. That compared with increases of 2.19% month over month and 8.41% year over year in December.
NRF says that unlike survey-based numbers collected by the Census Bureau, its Retail Monitor uses actual, anonymized credit and debit card purchase data compiled by Affinity Solutions and does not need to be revised monthly or annually.
As U.S. businesses count down the days until the expiration of the Trump Administration’s monthlong pause of tariffs on Canada and Mexico, a report from Uber Freight says the tariffs will likely be avoided through an extended agreement, since the potential for damaging consequences would be so severe for all parties.
If the tariffs occurred, they could push U.S. inflation higher, adding $1,000 to $1,200 to the average person's cost of living. And relief from interest rates would likely not come to the rescue, since inflation is already above the Fed's target, delaying further rate cuts.
A potential impact of the tariffs in the long run might be to boost domestic freight by giving local manufacturers an edge. However, the magnitude and sudden implementation of these tariffs means we likely won't see such benefits for a while, and the immediate damage will be more significant in the meantime, Uber Freight said in its “2025 Q1 Market update & outlook.”
That market volatility comes even as tough times continue in the freight market. In the U.S. full truckload sector, the cost per loaded mile currently exceeds spot rates significantly, which will likely push rate increases.
However, in the first quarter of 2025, spot rates are now falling, as they usually do in February following the winter peak. According to Uber Freight, this situation arose after truck operating costs rose 2 cents/mile in 2023 despite a 9-cent diesel price decline, thanks to increases in insurance (+13%), truck and trailer costs (+9%), and driver wages (+8%). Costs then fell 2 cents/mile in 2024, resulting in stable costs over the past two years.
Fortunately, Uber Freight predicts that the freight cycle could soon begin to turn, as signs of a recovery are emerging despite weak current demand. A measure of manufacturing growth called the ISM PMI edged up to 50.9 in December, surpassing the expansion threshold for the first time in 26 months.
Accordingly, new orders and production increased while employment stabilized. That means the U.S. manufacturing economy appears to be expanding after a prolonged period of contraction, signaling a positive outlook for freight demand, Uber Freight said.
The surge comes as the U.S. imposed a new 10% tariff on Chinese goods as of February 4, while pausing a more aggressive 25% tariffs on imports from Mexico and Canada until March, Descartes said in its “February Global Shipping Report.”
So far, ports are handling the surge well, with overall port transit time delays not significantly lengthening at the top 10 U.S. ports, despite elevated volumes for a seventh consecutive month. But the future may look more cloudy; businesses with global supply chains are coping with heightened uncertainty as they eye the new U.S. tariffs on China, continuing trade policy tensions, and ongoing geopolitical instability in the Middle East, Descartes said.
“The impact of new and potential tariffs, coupled with a late Chinese Lunar New Year (January 29 – February 12), may have contributed to higher U.S. container imports in January,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “These trade policy developments add significant uncertainty to global supply chains, increasing concerns about rising import costs and supply chain disruptions. As trade tensions escalate, businesses and consumers alike may face the risk of higher prices and prolonged market volatility.”
New York-based Cofactr will now integrate Factor.io’s capabilities into its unified platform, a supply chain and logistics management tool that streamlines production, processes, and policies for critical hardware manufacturers. The combined platform will give users complete visibility into the status of every part in their Bill of Materials (BOM), across the end-to-end direct material management process, the firm said.
Those capabilities are particularly crucial for Cofactr’s core customer base, which include manufacturers in high-compliance, highly regulated sectors such as defense, aerospace, robotics, and medtech.
“Whether an organization is supplying U.S. government agencies with critical hardware or working to meet ambitious product goals in an emerging space, they’re all looking for new ways to optimize old processes that stand between them and their need to iterate at breakneck speeds,” Matthew Haber, CEO and Co-founder of Cofactr, said in a release. “Through this acquisition, we’re giving them another way to do that with acute visibility into their full bill of materials across the many suppliers they work with, directly through our platform.”
“Poor data quality in the supply chain has always been a root cause of delays that create unnecessary costs and interfere with an organization’s speed to market. For manufacturers, especially those in regulated industries, manually cross-checking hundreds of supplier communications against ERP information while navigating other complex processes and policies is a recipe for disaster,” Shultz said. “With Cofactr, we’re now working with the best in the industry to scale our ability to eliminate time-consuming tasks and increase process efficiencies so manufacturers can instead focus on building their products.”
Economic activity in the logistics industry expanded in January, growing at its fastest clip in nearly two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.
An LMI reading above 50 indicates growth across warehousing and transportation markets, and a reading below 50 indicates contraction. The LMI has remained in the mid- to high 50s range for most of the past year, indicating moderate, consistent growth in logistics markets.
Inventory levels rose 8.5 points from December, driven by downstream retailers stocking up ahead of the Trump administration’s potential tariffs on imports from Mexico, Canada, and China. Those increases led to higher costs throughout the industry: inventory costs, warehousing prices, and transportation prices all expanded to readings above 70, indicating strong growth. This occurred alongside slowing growth in warehousing and transportation capacity, suggesting that prices are up due to demand rather than other factors, such as inflation, according to the LMI researchers.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).