Lately, there seem to be a lot of headlines predicting a downtrend in the transportation industry which includes hotshot trucking. At the same time, there are also positive predictions that are really promising. With all these speculations going on, it’s hard to tell which one to believe.
The trucking industry has always been dynamic. From time to time, we hear of new changes in technology, regulation and economy that are relevant to truckers. Given the dynamic nature of the industry, we need to be always abreast of what’s happening and to use that information to stay on top of the business.
Critical Issues in 2019
The trucking industry ended strong in 2018 and this extended to the early part of 2019. However, despite its good start, the industry still faced some critical issues and The American Transportation Research Institute (ATRI) summed them up. Their report is based on the findings of the 2019 annual survey and analysis, comparing them to the previous year’s results:
1. Driver shortage. Driver shortage is on the number one spot in the list of critical issues. In the first half of the year, businesses try to attract and keep qualified drivers by increasing their compensation and benefits, but still many struggled to fill their vacancies.
In February, congress reintroduced the Drive-Safe-Act as a potential solution to this issue. This act allows individuals 18-21 years old to enter a career in trucking. Although it is met with controversies, the implementation of this policy can mitigate the effects of the aging drivers in the workforce. To ensure success, it does need a strong partnership between the industry and government.
2. Hours of service – The Notice of Proposed Rulemaking (NPRM) on Hours of Service (HOS) rules provides the opportunity for flexibility in using the sleeper berth provision and of the 30-minute rest break.
3. Driver Compensation – This is the first time that driver compensation has emerged in the top issues in the history of ATRI survey. This is likely due to the fact that many fleets respond to driver shortage by increasing driver pay.
4. ELD Mandate – The mandate was fully implemented in 2017 with a deadline for fleet transition from AOBRDs to ELDs set to be no later than December 16, 2019.
5. Other issues – Based on the same survey, truckers also faced other issues in 2019 such as driver retention, truck parking, CSA (compliance, safety and accountability), transportation infrastructure and economy.
With the numerous critical issues in 2019, we can expect that some of these will continue in 2020, while other issues may have a different trend in the coming year.
With the above critical issues in 2019, you may be curious to know how the industry fared in 201
Trucking Industry Performance in 2019
For those working in the freight industry, its performance for 2019 is a bit of a surprise. That is because it ended weak compared with its strong performance in the preceding years.
To give you a better perspective, according to an analysis by the FTR Transportation Intelligence, the GDP Goods Transport Sector grew about 0.5% in the second quarter of 2019, while the growth rate for 2018 and 2017 were 3.2% and 5.7%, respectively.
This trend is quite alarming and we can’t put the blame on one single factor. Since we all want to know what 2020 would look like in the trucking business, the best way to know it is by looking back at the factors that caused a dramatic slowdown in 2019, and learn from them.
Top 2 Causes of 2019 Trucking Recession
In 2018, there have been rumors of forthcoming trade wars between the US and Mexico, as well as between the US and China. In 2019, the trade tariffs were already in effect and this has resulted in a decline in manufacturing and retail production rates. This situation means less demand for shipping and trucking services. Economists estimate that the net loss from trade tariffs is approximately $16.8 billion.
2017 and 2018 saw a huge growth in the industry, that is why many trucking businesses including owner operators expanded their operations. Unfortunately, the growth did not continue in 2019, leaving many caught off-guard. In 2019, truckload volume dropped by about 3 to 4% lower than the preceding year.
2020 Trucking Predictions
Increase in spot rates and contract rates
We all know of the capacity crunch in 2018 which loosened a bit in 2019 as more drivers got a job in trucking. This in turn caused the rates to go down in 2019. However, many experts feel that capacity will once again tighten at the start of 2020, causing an increase in both spot and contract rates.
In 2020, we will be keeping a close eye on the trade situation with China as well as the United States-Mexico-Canada Agreement (USMCA). These tariff changes will have a huge impact on the movement of freight for 2020.
Introduction of new regulations
After the deadline for the full implementation of the ELD mandate on December 16, 2019, there are other hot regulatory topics for 2020 such as the sleeper berth flexibility and the HOS regulations. The industry is looking forward for the restoration of the split sleeper berth flexibility system, allowing drivers to split up their sleeping time.
More companies will adopt blockchain
2019 has been a turning point for technology. More and more drivers and operators rely on apps for day-to-day operations, not to mention the compliance requirement for the ELD mandate which also entails the use of new technology.
For this coming year, you could expect that more operators will invest in Blockchain to be competitive. This technology could possibly pave the way for paperless operation, where all the documents will be in digital form. Using sophisticated security systems, blockchain protects your data while providing visibility for all relevant parties.
Artificial intelligence (AI) is another technology that may gain more popularity this year. AI will be useful in inventory management and other routine tasks. Some companies are already using AI to identify predictive trailer maintenance. We don’t know what AI can still do in the coming years.
Closure of some trucking businesses
Over the last few months before the end of 2019, several trucking companies were affected by the harsh market conditions, causing them to stop operations or to close their business. This trend is not likely to improve sooner at the start of 2020. This will eventually lead to thousands of drivers losing their jobs.
A market flip
The trucking industry might not be in the very best position right now but many experts are optimistic about 2020. Many believe that there will be a market flip this year which will benefit all truckers and drivers. Everybody is hoping that it’s for real.
E-commerce in trucking
E-commerce has grown tremendously these past few years. We are now in an age where many people get to experience to shop or hire a service provider through an online platform. With the expected boom of e-commerce in 2020, this can have a positive impact on the trucking industry. Afterall, e-commerce won’t be a success without truckers.
Rising fuel costs
Over the years, fuel costs continue to increase and there is no reason to speculate otherwise. However, since fuel plays a major role in your operation, the expenses associated with it are inevitable. Fortunately, there are ways on how you can cut on fuel cost without disrupting your operation.
Urbanization makes more areas accessible
Over the past several years, there has been a wide scale development across the country. This means that more and more areas have become accessible by trucks and delivery trailers. As a result, it widens the customer base of trucking businesses even further.
More businesses will use data analytics
In 2020, more and more trucks and trucking vehicles will be equipped with data analytics. This technology can help trucking businesses identify areas where they can improve on and areas they need to develop to become more efficient.
All of these predictions are likely to affect the course of the trucking industry in 2020. While there is no 100% assurance that all of these predictions will actually happen in the coming year, staying prepared could help make your business succeed in the coming year.