A promising picture has been painted, dubbing 2023 as “the year of the rebound” following the freight recession. But how can carries switch from survival to growth?
Widespread economic uncertainties and supply chain disruptions changed virtually every global industry. The trucking industry is no different, and now stands on the precipice of a transformative era. The recent Fleet Technology Index (FTI) presented by data analytics and advisory firm Escalent paints a promising picture, though, labeling 2023 as “the year of the rebound” following the freight recession. As FTR Vice President of Trucking, Avery Vise, noted in the “State of Freight” webinar series, “we’ve bottomed, according to our forecast.” This sentiment echoes the broader industry perspective, signaling a monumental shift among trucking fleets worldwide.
This rebound year won’t be a simple reaction to past challenges – it’s a proactive leap forward. The FTI’s findings suggest that over half of companies are diving deep into new technologies, conducting cost analyses, and gathering important information. This surge in interest underscores the industry’s recognition of the importance of technology for the future. We aren’t only looking to weather the storm – we want to harness the winds of change and set sail toward uncharted territories of growth and innovation.
Just like the myriad of highways that weave across the country, the trucking industry’s journey is rarely a straight path. Its route is marked by unexpected detours, and the freight recession stood out as a particularly daunting sharp turn. Recent downturns in the trucking spot market have sounded alarms, with declining spot rates causing ripples of concern among analysts. This, coupled with the challenges many fleets face, from driver recruitment to escalating labor, fuel, and equipment costs, has added extra layers of complexity.
However, in the face of such challenges, the industry’s resilience shines. Werner Enterprises’ CEO, Derek Leathers, recently expressed confidence that the worst of the freight recession has passed. These sentiments are echoed by many other experts within the industry. The general consensus is that while challenges persist, the industry is headed toward an inevitable rebound, with the question being when. Leathers’ perspective carries additional weight, especially given Werner’s position as one of the largest truckload carriers in the United States.
This shows that rather than being paralyzed by the potential of a market downturn, major carriers have actively discussed strategies and set new expectations. As CCJ Senior Editor Angel Coker described the shift, “Escalent’s recent Fleet Technology Index (FTI) indicates a shift from survival mode back to growth mode.”
As normalcy returns, we’re writing a new chapter. Fleet decision makers, once cautious, are pivoting with renewed vigor and recognizing the indispensable role technology will play in charting the course ahead. This isn’t mere speculation – the FTI score’s significant leap of 27 percent from 2020 to 2023 serves as a testament to this perspective shift. It’s a clear indicator that the industry is ready to position itself for a more tech-driven future.
The freight recession led the industry to not only use technology as a minor accessory but as a major instrument to steer businesses toward expansive growth. The FTI has been instrumental in capturing this shift. With a remarkable 33 percent increase in the FTI score for core tech like data analytics, telematics, BEVs, and AVs since 2020 and a 16 percent rise for emerging tech like Artificial Intelligence (AI), drones, and the blockchain, this data presents a vivid picture of our new trajectory.
Fascinatingly, AI technology has taken a front seat to surpass even autonomous vehicles with a score increase of 24 percent since 2020. Business intention to invest further into AI tech has risen by an astonishing 39 percent in the past 12 months. This rapid rise underscores how the industry has begun to recognize the transformative potential of AI. We can only expect it to continue playing a central role in the trucking landscape’s future.
Still, it should be noted that this technological renaissance is about more than new tools and software systems. There’s a profound transformation occurring that could reshape the core of the trucking industry. Technology will be a driving force for this transformation, enabling trucking companies to redefine previous paradigms of success.
The freight recession sounded an unmistakable alarm throughout the trucking industry. Fortunately, many businesses seem to have gotten the message: the time for mere adaptation is over – now we’re in the era of forward-thinking. If we aren’t at the forefront of innovation, we might risk falling into obsolescence.
As Chris Caplice, chief scientist at DAT Freight & Analytics, highlighted during a Journal of Commerce webcast, “We think the [truckload] spot market has hit bottom… We’re set up to start a recovery, but I agree it’s probably two quarters away, maybe three.” This sentiment underscores the industry’s current challenges, but also hints at the impending rebound.
Interestingly, shippers are using this extended downcycle to rethink their supply chains. Caplice noted that shippers are becoming more sophisticated in how they use transportation modes and procure services. In a typical downturn, spot market shipments might drop to 10 percent to 12 percent of total shipments. However, in 2023, the spot market still accounts for a significant 20 percent of shipment volume. This strategic use of the spot market, even in downturns, showcases the industry’s adaptability and forward-thinking approach.
Amidst all this transformation, the value of human relationships has emerged as more crucial than ever. “If you’re making it now running spot freight, you’re in a strong position to really make hay on the other side,” Vise suggested. He further emphasized that, especially in the volatile world of the spot market, “…maintenance of relationships with brokers and/or direct shippers is now more important than ever.” In our challenging freight market, trust and transparency are the bedrock of these relationships.
Caplice and other experts have urged shippers to use this extended downturn in goods shipping to build deeper carrier partnerships. “Hopefully, you’re getting your relationships with your asset-based and non-asset carriers in place,” Caplice said. “We all know the market will turn; it’s not going to go on like this forever.”
And this change in mindset and priorities isn’t just confined to boardroom strategies and operational blueprints. It’s becoming deeply ingrained throughout the industry. Drivers, logistics managers, mid-level executives, and CEOs alike are part of this palpable shift. There’s a renewed sense of purpose, propelling each of us to aim for a smarter, more sustainable, tech-driven future.
The FTI’s findings have emphasized how widespread this shift has been. In order to proceed with confidence, executives should be prioritizing continuous training programs for their teams so they stay up-to-date on the latest technological advancements in order to leverage them effectively. These initiatives not only empower employees with the tools and knowledge to excel, but also position companies as forward-thinking leaders of the industry.
The pandemic was an undeniably formidable disruptor, but it’s accelerated our march forward like nothing before. Still, we need to understand that this momentum isn’t just a knee-jerk response to global challenges. Instead, it’s a deliberate strategic pivot signaling a transition from mere survival to sustained growth.
But when we look at the broader economic landscape, there are still challenges and concerns. More than 60 percent of U.S. businesses remain overstocked – a lingering aftermath of the pandemic’s disruptions. This overstocking has contributed to prolonged contraction in U.S. freight volumes. However, there’s a silver lining – while some analysts from JOC suggest that a full freight rebound might not materialize until 2024, indications suggest that the freight recession should soon see its end, especially if consumer demand leads to a significant reduction in these inventories.
“Durable goods spending is being driven by the automotive sector, and low automotive inventories are stimulating some freight demand,” Mazen Danaf, an applied scientist and economist told FreightWaves. “When you look at the manufacturing sector, there are cyclical, short-term headwinds. All of that is bringing demand in manufacturing lower, but in long-term trends we see a lot of tailwinds for the manufacturing economy, from nearshoring and reshoring to investments in new technologies like EVs and semiconductors.”
Committing to technology transcends our immediate needs. It’s about laying a robust foundation for an industry that’s not just resilient, but agile and ready to face the uncertainties of tomorrow with unwavering confidence. Exploring these new technologies, from AI to data analytics, is about more than navigating the present. It’s about charting a course for a future where any disruptions can be met with adaptability and foresight.
“The year of the rebound” is more than just a fleeting moment – it’s a clarion call for the trucking industry to embrace technology as a cornerstone of growth. The FTI score rising isn’t just a simple statistic – it’s a testament to the industry’s newfound faith in technology’s ability to transform hurdles into springboards for success.
As businesses navigate these many challenges, we must remember what our most trusted experts have pointed out: the market will eventually turn. This current phase provides an excellent opportunity for trucking companies to solidify their relationships, craft new strategies, and ensure they’re ready for the rebound to come. And as carrier decision-makers move from simply navigating challenges to actively charting new territories for further growth, they lay the groundwork for a major industry-wide shift. It’s characterized by innovation, fiscal responsibility, and a new approach that places technology at the heart of every operation.
Our road ahead is clear: we’re going on a tech-infused journey where difficulties are not deterrents – they’re catalysts, propelling us forward towards a future of promise, progress, and unparalleled potential.
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