Dollars & Sense
Sylectus: Best July Ever, Just as Predicted
Last week, Sylectus released their always-informative overview of industry activity for the month of July. In our piece covering their June 2010 report, we noted the prediction that July would be even better than June.
Not that is should come as a surprise, but Sylectus was right.
They report that July 2010 was the best July theyâ€™ve ever seen. They note that â€œNot only were volumes higher, but rate per mile is now above pre-recession values.â€ They noted that volumes are up 36% over July 2009 and that July 2010 revenues were 75% higher than July 2009.
All indications are encouraging, as dollars and cents go. Rate per mile rose eight cents per mile over last month, for example. Sylectus notes that this is an indication that capacity is continuing to tighten, and predicts that this should cause â€œMore upward pressure on rate per mileâ€ figures. Along with this note comes a warning: â€œIf you have not adjusted your rates accordingly, your competition is making more money for doing the same amount of work.
Also figuring in to the tightening capacity in the Expedite market (capacity is, according to Sylectusâ€™s figures, 20% below normal) is that demand in July was 20% above normal. Itâ€™s this recipe thatâ€™s driving rates and revenues up. In other words, this very moment is a pretty good time to be in the expediting business if youâ€™re willing to be on the move.
Of course, along with all this good news has to bring with it the possibility of bad news. As noted before, capacity is currently below normal and with a continuing increase in volume, we could be looking at a legitimate, extended driver shortage. Sylectus says, â€œPrior to the 2008-2009 recession, there was talk of a impending driver shortage. Then the recession hit and suddenly the impending driver shortage was forgotten! During the recession, about 20-30% of drivers got out of the business. Now that demand is picking up, the driver shortage discussion begins again.â€
One potential solution, they say, is that carriers should consider increasing driver pay rates in order to attract more drivers to the industry. Thereâ€™s been a continual increase in recruiting, but thereâ€™s a negative side effect to this, as well: â€œDrivers now find it easier to move to another company.â€ The focus for carriers, then, becomes driver retention--hence the reason for the suggested pay increase.
Simply hiring more drivers, however, wonâ€™t necessarily meet the need for the capacity required to maintain the recent volume increases. There are only so many trucks available, and were carriers and/or drivers to order trucks, itâ€™d likely take four to five months to take possession in the first place, which means they â€œmight not be ready for use until December.â€ The point is this: as capacity goes, carriers and drivers are enjoying the revenue increase, but are walking a fine line at the moment when it comes to increasing capacity.
So, what to do? Sylectus lays out a few guidelines.
â€œSuccess and growth of trucking companies over the next 6-18 months will be dependent on:
Their ability to RETAIN their existing driving resources. Their ability to HIRE new, quality driving resources. Their ability to find QUALITY PARTNERS (like companies on the Sylectus Alliance) to provide additional capacity at a reasonable cost for their customers. Their ability to price their service properly based on the limited capacity. Their ability to build up their reserves to help weather any future economic uncertainties (re-build the war chest).â€ For now, the only available advice, I suppose, would be to continue to enjoy the increases and, as per usual, keep the nose to the olâ€™ grindstone.
For a copy of the complete Sylectus July synopsis, go to www.sylectus.com and look at the Stuâ€™s News section