2022’s Most Important Freight Capacity Trends | Breakthrough

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The 3 Most Important Freight Capacity Trends of 2022 — and Key Takeaways for 2023

Matt Muenster

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Matt Muenster
November 30, 2022

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Over the past year, shippers navigated supply chain disruptions, soaring consumer demand, and service volatilities. These challenges underscored a simple, yet urgent reality: Shippers needed more freight capacity, and they needed it now.

Although transportation network strategy primarily focuses on cost, capacity, service, and sustainability, capacity quickly became the driving force behind most freight decisions in 2022.

In August, we analyzed the year’s most important capacity trends at our annual transportation industry event, The Mercury Group. From diverse capacity applications to blended sourcing and policy influences, these trends are standouts in a rapidly changing transportation landscape — one filled with complex challenges and new opportunities for shippers.

Here’s what you need to know about 2022’s most significant freight capacity developments, and how they inform your 2023 freight strategy.

Trend #1: Soaring demand triggered diverse capacity applications

Shippers turned to the spot market and brokerage options to combat the spikes in demand and carrier capacity restrictions in 2022. Breakthrough shippers’ brokerage usage increased by nearly 30% over the last two and a half years, from 16% of total shipments in 2019 to 23% of total shipments through the first half of 2022. Although spot market usage has softened in the past year, it’s still significant — with shippers’ overall capacity strategies currently comprising 70% contract and 30% spot in the dry van market.

But while brokerage provided short-term relief for shippers during a period of high-capacity restraint, it came with significant cost premiums. It also created a disconnect between shippers and carriers that prevented many shippers from forming transparent, service-based carrier partnerships.

Throughout the year, carriers also invested in growing their dedicated capacity business. With this growth, carriers aimed to preserve strong shipper partnerships, build resilience to freight market disruption, and integrate technology to improve transportation network efficiency and sustainability.

Other developments further shifted the freight capacity landscape. This included an increase in the number of closed trucking operations — likely resulting from owner-operator closures, high diesel prices, and softening spot rates. It also included an increase in the number of carrier acquisitions as large and mega carriers sought additional capacity. Since June 2022 alone, there have been 12 acquisitions among the top 250 for-hire carrier companies. These developments eased market-wide capacity restraints and ultimately provided much-needed relief to shippers.

Trend #2: Intermodal usage declined as sourcing strategies evolved

Intermodal has long been a potential high-growth and high-capacity opportunity for the transportation industry. This mode offers unique opportunities for lower energy and freight costs and decreased emissions output for shippers, but low service performance has hindered widespread adoption.

While the industry experienced an increase in intermodal carrier usage in 2020, this growth began to slow — and eventually decline — in 2021. Intermodal services across Class I railways declined in 2022 as increased dwell time, heightened freight congestion, and decreased train speed burdened shipping routes. The Surface Transportation Board (STB) noted a 1.6% year-over-year decrease in the monthly average intermodal train speed for Class I railways. This was particularly noticeable over the past year as shippers faced the urgent need for capacity and reliable carrier service.

As a result, many shippers have left their intermodal carriers for truckload sourcing to move their goods efficiently. While intermodal has been largely unable to provide reliable service to shippers, it still has potential for achieving emerging sustainability initiatives and enabling significant cost savings.

Trend #3: External factors affected the freight capacity landscape

Internal and external developments significantly altered the transportation landscape in 2022. Most notably, California’s AB5 labor law went into effect on July 1 after the Supreme Court denied hearing the California Trucking Association’s challenge. This landmark labor law compelled independent truckers to be reclassified as employees instead of contractors, triggering uncertainty for more than 70,000 owner-operators in California. However, the extent to which this law will be enforced is still uncertain.

California will likely begin enforcement by scrutinizing large carriers that use independent contractors, but some smaller carriers and independent contractors will likely also be targeted for non-compliance. In response, many drivers are adopting a brokerage model or joining carriers as company drivers. Shippers that operate in California must consider how this law will affect their freight strategies and prepare for further disruption as independent contractor rulings gain traction in states like New Jersey and even at the federal level.

Additionally, rail labor negotiations and the potential of a rail strike posed a threat to 2022’s already-constricted supply chains. This threat was especially concerning for supply chains using intermodal shipping lanes, where a strike could exacerbate existing service challenges and shipping slow-downs.

Labor negotiations also persisted between the International Longshore and Warehouse Union (ILWU), representing West Coast port workers, and the Pacific Maritime Association (PMA), representing port terminals and ocean carriers. These negotiations could have potential freight capacity and service impacts in 2023, such as congestion and slow-downs affecting import and export container wait times, rail wait times, and truckload pickups.

Building an agile freight strategy for 2023 — and beyond

As you design your freight strategy for the new year, here are three tips for optimizing your transportation network and securing reliable capacity.

  1. Prioritize strong carrier partnerships to ensure efficient movement of goods. Trusted, service-based carrier partnerships can help you remain agile, navigate changing demand patterns, and plan for future capacity shifts.

  2. Invest in dynamic capacity sourcing solutions to optimize your network. Best-in-class technologies and expert data insights can help you select carriers that match your network priorities and reduce service disruptions.

  3. Closely follow public policy shifts and external transportation developments. Transportation policy and labor negotiations will likely persist into 2023, and your transportation network must be flexible enough to adapt to marketplace evolutions. A comprehensive view of your network data can also help you understand how policy shifts will impact your network and carrier service.

To learn more about designing a resilient freight strategy, schedule a demo of Network Intelligence, our agile freight procurement and management service.