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Syleconomics: November is another solid month for trucking

The trucking industry enjoyed another strong month in November 2011, the latest Syleconomics report from Sylectus indicates.

According to the report, which analyzes various business indicators from the Sylectus transportation management system, the trucking industry posted across-the-board gains in November 2011 as compared with November 2010, including a 26 percent gain in total revenue.

Although the November 2011 numbers were down slightly in comparison with October 2011, the report from Sylectus President Stuart Sutton noted that this shouldn’t be cause for alarm.

“November is always a bit slower due to the holidays,” Sutton reported. “The good news is that the rate/mile remained constant, even though the volume of business dropped a bit.”

One reason the trucking industry has performed so well since the end of the recession is because the difficult economic times led to the loss of as much as 30 percent of all trucking companies, and as much as 35 percent of the available driver capacity.

When the recession did end, it was difficult for new companies to get into the trucking industry because banks were reluctant to lend, and when demand did increase from the manufacturing sector, the drop in trucking capacity coupled with the driver shortage resulted in healthier revenues and stronger balance sheets for the trucking industry.

The trucking industry also benefited from a change in thinking by manufacturers who were reluctant to maintain large inventories for fear of another economic downturn. This created more of a “just-in-time” supply chain, which in turn led to even more demand for the trucking industry’s already-strained capacity.

Looking toward 2012, Sutton predicts another good year for the trucking industry.

“The economy will remain sluggish, but will still expand,” Sutton wrote. “This expansion, tied with the tight driver capacity, will result in higher transportation rates/profits.”

Sutton noted that some large companies recently raised their rates by as much as 4.5 percent, and he expects more similar announcements.

Shippers will try to develop long-term relationships with carriers and “lock in” transportation capacity in an effort to control their costs, Sutton predicted.

Drivers will benefit from the increased demand, Sutton wrote, as companies increase driver pay and look for other innovative ways to retain drivers. Still, Sutton expects driver turnover to increase as drivers look for the companies that offer the best return for their services.

Pricing officers, who can establish new pricing strategies and negotiate the best cost/price for the tight available truck capacity, will be the most sought-after personnel in a trucking company, Sutton wrote.

Sutton also expects an increase in mergers and acquisitions in the transportation industry as larger companies attempt to “buy capacity.”

Events such as natural disasters that cause short-term disturbances in the supply-chain system will have significant short-term impact on pricing, Sutton wrote.

Companies such as freight forwarders, logistics companies, etc. that do not have their own fleets could feel their margins being pinches as they attempt to service existing, long-term contracts in an environment where costs are rising, Sutton wrote, adding that this is especially true in the spot rate market.

Sutton also predicted that governments will attempt to implement new safety and security policies, which in turn will continue draw strong opposition from carriers and shippers who believe those policies will reduce available driver capacity as well as raise costs.