As 2022 winds down and the Pandemic appears to be subsiding, it’s tempting to put the tumultuous times of the last three years behind us and look forward to what will hopefully be a brighter future. Unfortunately, ongoing concerns about inflation and the likelihood of a recession have people wondering what 2023 has in store for the U.S. economy. Given these headwinds, it’s only reasonable that the U.S. Full Truckload shipping community also finds itself trying to figure out how the upcoming year will unfold.
While it’s impossible to predict exactly how the FTL market will behave in 2023, what shippers can do is reflect on the lessons learned from 2020-2022 and make strategic adjustments based on those learnings. In an effort to identify what FTL shippers garnered over the last couple of years, Emerge commissioned the research firm “Indago” to survey a group of manufacturers, distributors, and retailers.
Based on the results of the survey, a white paper has been created to capture lessons learned and what to expect in 2023. Here are some key takeaways.
A majority of shippers acknowledged that prior to the Pandemic, their FTL programs had been, for the most part, on “Auto Pilot”. Basically, shippers did a yearly bid, awarded business, disseminated Route Guides, and then relied on the waterfall capabilities of their transportation management system to cover loads. When things did not go as planned, markets were the only options. Some shippers found that this approach was less than optimal.
Perhaps the toughest lesson that shippers said they learned was that they didn’t have enough access to carrier capacity. This can be attributed, in part, to RFPs that are so time-consuming that only a small pool of carriers was invited to bid. Shippers quickly ran out of options as their primary, secondary and backup carriers rejected loads. From there, the lesson got expensive as companies turned to the spot market for service.
Closely tied to the “Set It and Forget It'' mentality, survey respondents were open about how quickly they learned that yearly RFPs contributed to their troubles. With the dramatic shift in rates and capacity that began in mid-2020, the experience of nearly all FTL shippers confirmed that pricing set in a yearly RFP was obsolete within weeks and that the aftermath produced an onslaught of paper rates.
The Indago survey also revealed that shippers regretted not having dedicated more time and resources to adopting freight-centric technology. Starting with RFPs that are manual and time-consuming, and then extending into areas that include an absence of timely rate data and an inability to track loads, shippers now realize that freight-centric technology could have alleviated some of their biggest pain points.
While no one can say with total confidence how the U.S. FTL market will unfold in 2023, recent volume trends allow for reasonable predictions to be made. Given that the first few months of any year are typically soft, the ongoing impact of inflation will likely put more downward pressure on Q1 loads and as such, rates. It should be noted that this trend applies to the shipment of goods manufactured domestically, as well as due to a substantial dip in imports.
If The Fed reduces interest rates by the end of Q2, it’s possible that the housing market will bounce back with a commensurate uptick in FTL volumes. Until that happens, there will be more capacity in the market and at least over the short term.
Apart from the above-mentioned macroeconomic factors that will impact the FTL industry, here are some predictions about shipper behavior that will shape the market on both a short and long-term basis.
If there’s one thing that shippers have learned, it’s that a limited carrier base no longer makes sense. Historically constrained by time and resource limitations, shippers know that they need a broader array of reliable FTL carrier options. Enabled by technology and their own commitment to improve in this area, 2023 will see shipper-specific carrier diversification increase by a factor of at least thirty percent, according to the survey.
Not only will shippers engage with more carriers, but they’ll also work on developing relationships with those providers. While some transactions do not rely on human interaction, shippers will adopt a “know them before you need them to approach” with carriers they choose to add to their bid events.
The truth is that yearly RFPs were losing relevance well before 2020; it took the tumult of the shutdown and ensuing market volatility to bring this fact to the forefront. What’s now even more evident is that in an effort to stay in tune with market conditions, the growth in the number of shippers that conduct multiple mini-bids per year will grow dramatically.
The good news is that advances in FTL technology will continue to reduce manual and time-consuming activities, thus freeing up time for shippers to focus on strategic decisions and building relationships. Starting with the Emerge Freight Procurement Platform that enables fully digitized and streamlined mini-bids, and moving to features like rate benchmarking and the increasing trend toward integration of freight procurement solutions with TMS technology, 2023 promises to be a time of innovation.
It was nearly a century ago that Harvard professor and philosopher George Santayana said, “Those that don’t remember the past are condemned to repeat it”. Although this is true in any field of human endeavor, the key for the post-Pandemic FTL industry is to not only remember what went awry over the last three years but to apply what they learned to new market realities.
Based on the outcome of the Indago survey of FTL shippers, it’s clear that manufacturers, distributors, and retailers have taken those lessons to heart and that they’ll continue to adjust their strategies as 2023 approaches. Of equal importance, technology will keep pace with these shifts, thus allowing companies to execute their objectives.
To learn more about what is to come and new best practices, review a copy of this new research-based white paper: