Higher Volumes and Lower Rejections? Fleet Counts Hold the Answer.

Most of the businesses we partner with come to us for one overall reason. They’re frustrated by reacting to freight issues instead of growing their businesses. But without the right information, it’s increasingly impossible to predict the freight market. In fact, logistics gets more complicated and expensive all the time.

AM Transport’s Michael McKinney foresaw a “new normal” for the trucking industry when he predicted that a strong 2018 for trucking would add capacity back to the market in turn loosening capacity in 2019. “I was certain that the second half of 2019 would provide shippers with an opportunity to breathe and work on their freight networks while reviewing cost structures.”

We’ve certainly seen this play out in the rejection rates of contracted freight by carriers tracking closely with spot market price movement. In general, spot market prices fall as rejections fall and vice versa.

Take a look at the map below. As you can see, rejections have fallen from heights reached in 2018. In addition, you can see that the same seasonal trends largely exist in rejections, but that the volatility and magnitude of movement within rejection rates has tamed down quite significantly.

Large decreases in rejections is typically the result of a decreased load to truck ratio, where less available freight per active carrier causes carriers to snap up the vast majority of freight that comes their way. This usually occurs when there is a decrease in tendered volume or an increase in trucks available.

In the chart below, you can see that 2019 volumes were significantly below 2018 volumes from mid-May through the latter half of July. However, 2019 contracted volumes have remained quite steady and have exceeded 2018 levels from late July onward. With the number of rejections holding low and contracted volumes quite healthy, we can hypothesize that capacity has expanded.

But take a look at the following chart. To say that capacity has expanded would be a gross understatement. In the single month period between July and August 2018, total fleet count in the US increased by 4.3% and that total fleet count increased a whopping 14% from the beginning of 2018 to the most recently available data at the time of writing (August 2019).

You’ll see that 82% of the fleet count total are fleets with just 1-6 power units, and most of the gains in the fleet count totals have come from this segment of fleets.

Number of fleets with 1-6 power units in blue; Number of fleets with 7-11 power units in green; Number of fleets with 12-19 in orange; Number of fleets with 20-100 in purple; Number of fleets with 101-999 in yellow; Number of fleets with 1000+ in pink

Despite the almost constant warnings of an emergency driver shortage, there is an undeniable oversupply of capacity in the market.

 What remains to be seen is whether the small carriers who are driving increases in capacity can also adapt and thrive as the era of freight technology and advanced visibility continues to unfold.

It’s a good time for businesses looking to navigate this “new normal” to partner with logistics providers offering the technology, expertise, and service to help businesses take their logistics services to the next level. 

AM Transport Services is the leading provider of outsourced logistics services for manufacturers and distributors. We provide proven technology, exceptional service, and a plan customized to your company’s needs. If you don’t have a complete picture of your logistics operation and would like an in-depth evaluation of what to expect, schedule a call today.