Since late February of this year, the average length of haul has been changing in a dramatic way.
What does this mean to carriers and shippers, and why?
The SONAR chart below shows truckload tender volumes and the relative change of each length of haul. City (local) – CTVI and Short-haul (SOTVI) have increased in volumes over the longer lengths of haul.
These two distances had been showing signs of resistance to the drop in volumes impacting all lengths of haul since mid- to late February. However, April 20th is the specific day that local and short-haul broke from the pack.
There are several macroeconomic reasons for this, including changes in consumer spending habits and negative sales to inventory levels. The urgency of shipments to get to destinations began to wane, and as the SONAR chart below shows, the average price of intermodal dropped over $0.11 per mile.
This next chart shows the motivation of shippers to utilize intermodal as the savings spread spiked in April.
This savings, combined with a drop in service urgency, was ample motivation to cause more long-haul moves to convert to rail.
We are seeing this impact now as there are multiple back-ups at rail yards, a lack of chassis capacity, and even rail struggles at the ports.
The SONAR chart above shows the impact on carriers and shippers as the volumes changed in the various lengths of haul.
The relative demand on capacity is changing, causing the rejection ratios to adjust as longer lengths of haul are in less demand relative to the shorter lengths of haul.
Understanding this dynamic will assist in securing loads and capacity as both carriers and shippers navigate through this current environment.
Potential rail strikes, AB5, port contract negotiations (domestic and foreign), consumer sentiment, import bookings, sales to inventory ratios, etc. are impacting the trucking and rail modes of transport.
All of these factors are important in understanding how the freight markets arrived at this point and where they are heading.
Tactically, you can better understand where to secure loads or secure capacity at the best prices. Strategically, you can better understand how to guide your business forward.
Peace and love