The State of Freight: How Technology Can Help Manage the New Unpredictable Normal

If there’s one thing that freight market data shows over the last several years, it’s that ups and downs are the new normal. As we discussed in the final months of 2023, the freight market has needed to adapt to a changed industry landscape after the early-2020’s pandemic boom. To get a better sense of where we are and where we’re going, we spoke with Kelly Williams, VP of Enterprise Product Management for Trimble, about the future of freight and how technology solutions can help transportation businesses thrive.

The State of Freight

“The cyclical nature of freight markets is like the sun rising and setting,” said Williams. “The only certainty is that consumer, manufacturing, economic, seasonal and other factors will continually impact freight volumes and capacity requirements. But there are still many ways for fleets to adapt and gain an edge.”

Recent reports on the freight environment prove her point.

After falling in April due to lower diesel prices and a freight rate environment that was less negative for carriers than has typically been the case over the past couple of years, the FTR Trucking Conditions Index (TCI) rose in May. The TCI tracks changes representing five major conditions in the US truck market, including freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. 

But FTR also said that May’s TCI is likely an outlier and it expects readings to return to negative territory through at least late this year. “A big piece of May’s positive TCI was lower fuel costs, but freight rates also were much less unfavorable for carriers than usual since the fourth quarter of 2022,” said Avery Vise, FTR’s vice president of trucking. “We expect rates to be mostly stable overall through late this year. However, the capacity overhang remains large and will delay anything that could remotely be called a rebound.”

In May, the American Trucking Associations reported, the industry experienced its first increase in tonnage this year. That month, the ATA For-Hire Truck Tonnage Index grew 1.5% year-over-year, the first annual gain in 15 months, and reflected a 3.6% increase from April.

“May was the first month since February 2023 that tonnage increased both sequentially and from a year earlier,” ATA Chief Economist Bob Costello said. “However, the truck freight market had remained soft in April as seasonally adjusted volumes fell for the second straight month. It is still too early to say whether this is the start of a long-awaited recovery in the truck freight market.”

Shipments readings in June decreased 5.8% year-over-year in the Cass Freight Index but the figure was unchanged from the previous month. While the index highlights several positive indicators, Cass Freight also cautioned that shipments have softened significantly in the second quarter after making improvements in Q1.

Maximizing Labor Productivity 

For carriers, Williams noted, dealing with the volatility of the freight market by adapting to changing markets is the path to ongoing profitability. In particular, she added, maximizing labor productivity can be especially important and in that area the industry has had recent success.

For example, data in the Transportation Economic Trends report from the US Department of Transportation Bureau of Labor Statistics (BLS), showed that transportation labor productivity increased only marginally in 2022 after decreasing the previous year. 

The BLS report, which measures labor hours and gross output, is an indicator of how the industry’s workforce responds to regulations and policies, changes in labor costs, and competitive pressures. For Williams, the report indicates that compared to other modes of transportation, trucking productivity has remained relatively stagnant.  To improve labor productivity, Williams believes carriers must adopt technology that eliminates repetitive, manual and time-consuming tasks.

Optimizing Operations with Technology

“A full-scale, end-to-end transportation management system is a strong backbone for improving efficiency and productivity because it optimizes operations through automation and streamlines workflows,” Williams said. “That’s why, as we look at the next generation of TMS solutions, we’re focused on leveraging Artificial Intelligence and Machine Learning technologies to build systems that drive labor productivity even higher.”

That focus is in fact validated by the results of a survey conducted by Trimble and FreightWaves that illustrates not only how fleets are managing through a downturn in volume but also their objectives, the strategies they have for improving operations, and the technology solutions they see as most effective. 

Some of those results included:

• • Respondents reported automating manual tasks (49%) and reducing paperwork and manual documentation (48%) were their most common optimization initiatives, followed by enhancing supply chain visibility (28%).
  • Optimizing load scheduling and routing was reported as the most important strategy fleets are using to improve their businesses (ranked approximately 4 on a 5-point scale).
  • A majority of fleets (61%) reported the objective of using the data they gain from technology to optimize freight allocation and load matching.

It’s important to note as well that a competitive advantage and a key to profitability in today’s highly connected supply chain is technology that connects stakeholders. For example, a transportation procurement platform can enable shippers and carriers to collectively find the best way to move freight by establishing relationships based on their needs and priorities. The same solutions expedite contracting, onboarding and transactional processes, and quickly lead to decisions that make more effective use of capacity.

“There are ongoing challenges for fleets,” Williams said, “but also opportunities to put solutions in place that improve processes. Taking the time to reassess operations, change practices and deploy advanced transportation management technology will equip trucking and transportation businesses for inevitable swings in the freight market and allow them to deliver on customer needs, maximize productivity and efficiency, set themselves apart from the competition and drive profitability in up and down markets.”

Adapting to an Unpredictable Future Market 

The evidence is strong that the only thing carriers and shippers can count on any longer is continued change. Cyclical markets are a part of the trucking and transportation business, and now the loss of predictability appears here to stay.

A look back over the past 15 years tells the story. From the end of the Great Recession in 2008 until 2016 the domestic freight market was relatively stable. Then the industrial economy hit a stumbling block, which led to a softening of the freight market as demand for goods fell. 

By late 2017, though, tax incentives and other factors drove up volumes and demand for freight carrying capacity and through much of 2019 freight markets were on a steady course. But then came the COVID-19 pandemic and the massive and unprecedented supply chain disruptions it caused.

Since then, the economic headwinds of inflation and ongoing supply chain challenges have been causing wider fluctuations in freight capacity. What the industry sees one day can be in the past in short order. Freight market volatility is now the “new normal.”

As that pendulum swings back and forth, Williams related, for trucking and transportation businesses the question is not what the next freight cycle will look like. Instead, it’s how to use technology to manage effectively through constantly changing and shifting markets, driven by forces that are impossible to anticipate.

“Technology that enables a more proactive and even a predictive approach to getting ahead of supply and demand changes that impact freight markets is needed,” Williams continued. “If we do those things right it will have a positive impact on your top and bottom line.”

Is your business striving for excellence amid a challenging market? Contact our team to learn how Trimble's portfolio of solutions can help you achieve new levels of efficiency and success.