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2016 Forecast

Industry Experts Peer into their Crystal Ball

By Sean M. Lyden - Staff Writer
Posted Feb 9th 2016 11:34AM

What does the expediting trucking landscape look like for 2016? What trends should we expect?

EO recently spoke with industry veterans John Elliott, chief executive officer for Load One LLC, an expedited trucking carrier headquartered in Taylor, Mich., and Stuart Sutton, former president of Sylectus and now CEO of Full Circle TMS, a Toronto-based transportation management software firm. We asked them to peer into their crystal ball and share what they see for 2016. Here are the highlights.

On the State of Expediting

Elliott: I would have to say the crystal ball on expedite for 2016 is very foggy right now. Fourth quarter (2015) volumes were down below normal. Usually certain key metrics line up and give you a pretty good feel for the direction of things. That does not seem to be the case as of late. Automotive build numbers are strong, yet automotive expedite load volumes are down year over year. Same is true with durable goods orders as they relate to sales vs. truck tonnage. If I was a betting man -- which every business owner is to a big extent -- I would say 2016 is going to be choppy. I think the global financial markets are going to play some havoc on our stock market. Now, how bad it hits will really determine what happens with consumer confidence.

All in all I think 2016 is going to be pretty comparable to 2015 and soft. I think we will see some "thinning" of the herd as some not well managed expedite carriers consolidate or close up shop.

Sutton: Normally in July it's slow and then it starts to pick up in August. But what I've heard from carriers is that they didn't see that uptick this past August, September, and October. They're also saying that January (2016) seemed to be slower, as well. You have to look at the macro economics. If there is a slow down in the larger economy, expediting can be vulnerable because the demand for urgency is not there. Companies start watching their costs more closely, so they'll say, "Well, do I really need to expedite it or can we wait an extra day or two and just put it on some regular truckload?"

On Fuel Prices

Elliott: Falling gas prices have been good for the industry and should be good for the economy as it gives the average person an increase in disposable spending. But, now with the rise of the American energy sector, we are seeing the painful effects of low oil prices hit us on the [expedite demand] side of the equation.

On Driver Demand

Elliott: I think the demand for good drivers will remain strong unless we are hit with a full-blown recession. If the market and pricing stay soft, I think it makes it hard for carriers to enhance driver pay as the trend has been for the last few years. This is sad as I think the drivers are, in general, under-compensated for the work they do, and that compensation was really moving in a good direction for them.

Sutton: I think you're still going to see the good drivers hard to get. If there is a slowdown, there might be a brief pause in driver demand, but as soon the next uptick happens, we'll be right back into the thick of a driver shortage.

On the Truck Market
Elliott: Class 8 sales have fallen hard, and a big part of that is tied to global export market. But the used truck valuations have dropped significantly in the last 120 days. This may create some opportunity for owner-operators to upgrade to newer used trucks. I also think we will possibly see more used class 8 conversions to straight trucks as the economics of it improves.

On the "Uber-ization" of Expediting

Sutton: I have seen over the last three to four years several companies try to replicate [on-demand transportation firm] Uber in trucking. They are trying to cut out the trucking company or the logistic company by building its network for drivers to go directly to consumers It's an interesting concept, but I haven't seen anybody make it work on the expediting side of things yet.

Uber makes sense for a taxi function in a metropolitan market where there's a high volume of capacity -- cars -- and high demand -- people who want to move around the city. But you're talking about short trips. When you take a look at the way freight moves across North America, it's not the same. Your freight is not homogeneous like shuttling people; it could be an envelope or it could be large freight. And you're not just traveling six miles or so. You're moving across the continent, so doing something like Uber in the freight industry, in general, would seem to be very challenging right now.

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