Shipping volatility causes major disruption to carrier networks
It may seem obvious, but as this week’s chart illustrates, there is a clear relationship between fluctuating truckload volumes and the chance for declining carrier compliance rates. Inconsistent volumes can be one of the biggest drivers of increasing spot rates, and the COVID-19 pandemic has exaggerated its impact on trucking networks.
The Trucks-in-Market Index (TiM) is based on telematics data that measures where trucks end their day in the U.S. — in this case the Los Angeles market. The Los Angeles market was chosen due to its significant role in the recent freight market recovery. The index illustrates fluctuations in how many trucks are present in a given market, loaded or empty. It is an index with a base value of 100 for each of the 135 markets in the U.S., with a base period of the first week of April in 2018. The purpose of this index is to monitor truck flow throughout the country.
The Outbound Tender Volume Index (OTVI) and Outbound Tender Rejection Index (OTRI) are shown alongside the TiM to illustrate the relationship between trucking volumes and truck availability and its subsequent impact on carrier compliance rates.
After the surge in shipments in March, there was an expansion between the weekly high and low values of how many trucks were ending their day in the LA market. Sundays tend to be the low-value day while Wednesdays are the high-value days, indicating there are more active trucks in the area on Wednesday than any other day of the week in Los Angeles. This correlates strongly with what we have seen in regard to shipping activity with our tender data.
To put this in perspective, this means that if there were 108 trucks in Los Angeles on Sundays and 116 trucks on Wednesdays each week prior to the outbreak, now there are 78 trucks on Sundays and 104 trucks on Wednesdays. These are not actual numbers but made smaller for the purpose of illustration.
Looking at the OTVI for Los Angeles on top of the TiM, variance of trucking activity remained elevated as volumes fell through April. This is an indication that declining volumes did not stabilize the number of active trucks in the market as many probably shut down their devices for extended periods of time as volumes slowed.
As volumes ramped up again in June, the variance became even more exaggerated between the high and low activity days. Tender rejection rates increased the most when the difference between high and low activity days during the week were at their highest levels.
To summarize, the effect of increasing or declining volumes in a short period of time can wreak equal amounts of havoc on carrier networks by making it difficult for carriers to anticipate demand levels. Volume volatility has as much impact on capacity as surging demand. This year has seen plenty of both.
With many states considering lockdowns once again, the second half of 2020 may have more swings than the first, pushing rates to new highs and lows.
© 2019 Worldfreightrates News