Truckload Market Shifts into Higher Gear
The national Outbound Tender Reject Index (OTRI) has surpassed 10% for the first time since April 2022, indicating a significant shift in the truckload market. This surge in rejection rates, combined with a nearly 10% increase in spot rates, signals a marked change in the transportation landscape.
Seasonal Peaks Return
After a prolonged period of oversupply, the truckload market is finally experiencing seasonal peaks, with Christmas being the highest among them. In contrast to last year’s OTRI peak of 5.6%, this year’s rate indicates a more challenging environment for shippers, with one in every 10 loads being rejected.
A Far Cry from the Pandemic Years
During the pandemic, the OTRI hovered above 20% for nearly 18 months, resulting in significant sourcing problems for transportation managers. While the current market is still far from those extreme conditions, it is becoming increasingly volatile, making it difficult for shippers to estimate the magnitude of seasonal swings.
Shippers Adapt to Volatility
To mitigate exposure to increasing transportation market volatility, shippers have been employing various strategies. One such approach is increasing lead times, which has become an ongoing trend even in relatively loose markets. Shippers are now giving carriers an average of half a day more notice than in 2019.
Intermodal and Inventory Management
Intermodal has regained favor with shippers, with domestic-size containers averaging over 10% higher year-over-year this past December. Additionally, inventory management practices have evolved, reducing the distance between warehouses and consumers. This shift has led to a decrease in middle haul loads and an increase in local haul loads.
The Impact of Carrier Exits
Despite these mitigating factors, the trucking market has become more responsive due to the removal of demand from the market. The record number of carrier exits, roughly 41,000 fewer carriers since July 2022, has contributed to this shift. If shippers had reverted to pre-COVID supply chain management strategies, the truckload market would have been in chaos over the holiday season.
Looking Ahead to 2025
As capacity continues to bleed off at record levels, supply chain and transportation managers will face significant challenges in 2025. With ongoing economic uncertainty and geopolitical instability, it is crucial for shippers to adapt to the changing market conditions to ensure a smoother transition to a tighter state.
Leave a Reply