How’s the 2024 trucking market going to treat you?

Welcome to the 2024 transportation forecast series
In last year's introduction, we wrote about the tremendous transportation price and capacity volatility in 2022, where massive rate inflation at the beginning of the year became massive rate deflation by year's end. 2023 saw a continuing trend of rate deflation across most transportation modes, allowing shippers to reassess their transportation strategies in a “calmer” time. However, less-than-truckload (LTL) shippers reliant on Yellow won't say it was a calm year … neither will UPS parcel customers who had the chance of a strike hanging over their heads or ocean shippers with cargo navigating the Red Sea as of late.

Nowadays, we must all face a new reality: volatility will never go away across our transportation networks. We're always one strike, one bankruptcy or one geopolitical conflict away from a massive disruption of market dynamics in a particular mode or region. The best we can do is to continually re-evaluate and modify our transportation plans, based on the best information we have at the time, and try to create the most robust, pragmatic and implementable strategy we can. The following posts offer expert insight that can inform your scenario planning and prepare your organization for whatever disruptions 2024 brings.

The 2024 trucking market outlook

As the largest mode of freight transportation for many of our clients, what happens in truckload markets has an outsized impact on transportation and logistics budgets. We use the terms “markets” because it is important to understand that there are many different types of truckload (TL) transportation (dry van, temperature-control, flatbed, bulk, intermodal, national, regional, local, dedicated, to name a few) and pricing trends can move a bit differently — and at different times — in each market. We won’t dig into all those modes individually but need to at least acknowledge there are differences and repeat this warning from past years.

Enjoy the low truckload rates while you can and prepare for the eventual upturn

The current truckload deflationary cycle that's run from the second half of 2022 through 2023 is one of the longest in recent memory. This cycle dovetailed with the cooling of consumer-level inflation indicators like the Consumer Price Index (CPI), fueled in part by consumers spending more on services at the expense of goods that ride on a truck.

The deflation isn't a massive surprise given the pandemic-induced inflationary cycle produced the largest rate increases in decades. The profits made during that inflationary cycle have allowed more capacity to stay in the market longer than we’ve seen in past cycles. And while demand has been good, it wasn’t what was needed to keep all that capacity utilized.

So, pricing drifted downwards throughout 2023. As we’ve written before on truckload pricing trends, it always boils down to supply (drivers) and demand (loads). That didn't change. Spot truckload pricing was below contract pricing for all of 2023, thereby providing a favorable environment for shippers, who continued to roll back pricing increases from the pandemic. There were some periods of tighter capacity around the holidays, but nothing that has truly stuck. It was the “catch your breath” kind of year we’d predicted.

As we look forward into 2024, it’s our belief that it’ll be a tale of two halves. The capacity-demand balance won't resolve itself quickly. The first half of 2024 is likely to be a continuation of what we’ve seen in 2023. While the time for double-digit savings from requests for proposal (RFPs) is likely over — given that last year’s comparisons are to 2023’s rates and thus lower — there’ll still be deflationary pressure in the market. Given the current low level of tender rejections in the market, those prices should stick around for a good part of the year as well. Market softness will steadily dissipate, and shippers should get ready for the market to turn, likely in the second half of the year. We expect the rise in truckload prices to be gradual and not dramatic, barring disruptive geopolitical or weather events. What this will likely lead to is truckload rates being essentially flat in 2024 (ranged -1% down to 1% up). The small decreases of the first half will likely be offset by the increases in the second half.

The less-than-truckload market may settle down from 2023’s excitement

The less-than-truckload (LTL) market saw more disruption than TL in 2023. After years of struggles, the third-largest LTL carrier, Yellow Corp, ceased operations in August. The company’s decline became irreversible as shippers pulled freight amid public labor strife with the Teamsters. This led to a lot of re-pricing of freight Yellow had hauled. Many shippers used Yellow as more of a low-cost provider, so re-pricing was typically inflationary. Even though demand wasn't increasing, and the LTL networks could absorb the freight, LTL carriers used this disruptive event to solidify their pricing position. This wasn't a big surprise given the much smaller supply base in the LTL marketplace (tens of carriers) versus TL (hundreds of thousands of carriers) makes the shutdown of a single large carrier have more impact.

So, we enter 2024 with a “right-sized” LTL supply/capacity picture. The demand/volume picture is a little hazier, though. LTL carriers are still heavily tied to the industrial and manufacturing sectors of the economy. The U.S. Purchasing Managers Index (PMI) from the Institute for Supply Management (ISM) has been in contraction territory (below 50 in the index) for the last 14 months, including all of 2023. The health of the industrial economy will certainly play into LTL pricing in 2024.

LTL carriers have always shown more pricing discipline, and that won't change this year. 2024 general rate increases (GRIs) announced in December 2023 and January 2024 averaged five to six percent; we don't expect overall LTL prices to be that high in 2024 given the state of the economy. However, like truckload, we expect volume to pick up in the second half of the year. The overall impact of LTL rate increases won't be as muted as in 2023. We expect a three to five percent rate increase to be where we end up for LTL rate inflation in 2024.

Our transportation strategy advice for the coming year

You might accuse me of being lazy, but the advice isn't going to change much from last year. Developing your transportation strategy so your organization succeeds in a dynamic transportation market is always going to be important. The next disruption causing renewed supply chain volatility is around the corner. A geopolitical conflict can swiftly turn transportation markets and supply chains on their head in this hyper-connected world, as shown by the Red Sea cargo vessel attacks quickly reducing ocean freight capacity and driving up rates.

Develop a diversified truckload carrier strategy

We continue to encourage shippers to approach their transportation provider strategy the same way one builds a diversified financial portfolio. Undertake efforts to use the proper mix of modal options (TL, LTL, Intermodal). Also focus on the right mix of provider types (asset-based and non-asset-based) and don’t put all your proverbial eggs in a too-small number of provider baskets.

Use technology like transportation management systems (TMS) and routing guides to make sure your diversification strategy is executed and properly engages your provider base. An award of business that never leads to an actual load tender isn't going to endear you to that provider when times get tough. Capacity in transportation will eventually turn in the carriers’ favor again. You’ll need to have a decent-sized (and not too small) group of carriers you are giving consistent business to so that those partners will be there when you need them — especially when some of your partners start to "tap out.”

Sensible, diversified sourcing and procurement approaches are important tools to achieve such a diversified provider portfolio. The big, annual network bid shouldn't be the only arrow in the quiver any more than mini-bids or spot bids should be the only arrows either. Using the right sourcing approach for the economic environment and the lane network are key for shippers as they strengthen their portfolios and prepare for the volatility ahead.

And – as always – now’s the time to get your own warehouse in order

Tackle the inefficiencies in your processes that delay your transportation partners. Efforts to reduce the time carriers wait (and waste) at your dock won't only improve your providers’ utilization, it’ll make you a favored shipper when capacity starts tightening. You can’t be a shipper of choice when providers have already chosen to prioritize more efficient shippers.

A new pricing cycle is coming, and the next transportation disruption is never far away.

Contact us and see how NTT DATA’s Supply Chain Consulting service will make sure your organization is always several steps ahead of the market, ready for whatever comes next. Our top supply chain talent, enabled by proven, leading-edge digital assets — tools, methods and content — deliver actionable insights and measurable outcomes to some of today’s largest and most complex supply chains.