Forget the Perfect Storm…This Is Looking Like A Full-Fledged Frankenstorm!

I began to refer to what was coming down the pike in the transportation marketplace as “The Perfect Storm” in early 2017. But I’ve realized that term may have become so common now that we’ve lost perspective on what’s really happening. So, realistically, a better word for our current situation might be a full-fledged Frankenstorm (There does exist a more accurate description for this type of storm, but unlike our political leaders who have no problem with the S-word, we need to maintain our PG rating).

Why am I sounding the alarm bells? Recently, I received an e-mail from a CEO that read, “Mike, your Two Minute Warnings are right on and scary for shippers. Availability and cancelled loads are killing us…and we are a good shipper!” I told him a few things you—and your C-Level Executives—need to know.

Right now, we are seeing things in the freight markets that we have not seen—not even in the crunches of 2005 or 2014. So if you don’t adjust to these new realities, your freight budgets are going to be blown, you run the risk of not being able to meet your customers’ demands, and a whole bunch of people in your company will be looking at you and demanding an explanation! Sure sounds like a Frankenstorm to me!

Consider some sobering facts. At the height of the 2014 capacity crunch, Internet Truck Stop’s Market Demand Index (MDI) peaked at around 27. (The MDI gauges supply and demand. When it is between 7-10 the market is considered “in balance.” Above 10, the market favors the carriers). For the past four weeks, the MDI has been above 40! Add to that the stunning fact the reality that we are in January—historically one of the weakest freight months of the year!

Beyond the MDI, there are all sorts of other reports and statistics which confirm that 2018 is going to be unlike any other year for shippers who want to be able to move their freight at a reasonable cost. For example, the CFO of a billion dollar truckload carrier recently explained to me that his company hauls about 6,200 loads per week. Right now they are turning down 800 to 1,200 loads every day! Here’s another example: the second largest truckload carrier in the country is currently running at about 145% of capacity! And once again, when you consider we’re hitting these numbers in January, it makes you wonder—-what will March through May look like?

For those that are still “Doubting Thomases,” you can go to our Perfect Storm Center, which features articles from numerous publications about the current state of the market, as well as interviews with industry experts on how to navigate the current market. You can also check out Wolfe Research’s recently released “State of the Freight: Top 10 Takeaways from Our 1Q Shipper Survey”. They all reach the same conclusion: This capacity crisis isn’t some temporary phenomena—there are systemic issues affecting the trucking industry that will result in very tight capacity for 2018 and on into 2019.

Over the years, I’ve given a presentation to over 100 audiences that applies the principles from the Max H. Bazerman and Michael D. Watkins book, “Predictable Surprises” to the transportation market. Bazerman and Watkins describe how some situations or circumstances that are viewed as surprises are actually entirely predictable. The problem is that these “surprises” are marginalized for either economic or societal reasons. They further note that there are four attributes of predictable surprises. Specifically, these are issues that:

• At least some people are aware of;
• Are getting worse over time;
• Are likely to explode into a crisis eventually; and
• But are not prioritized by key decision-makers or have not elicited a response fast enough to prevent severe damage

Folks, what is happening in the freight markets is entirely a Predictable Surprise. Addressing these predictable surprises may require a significant investment in the near term, and it may include addressing some established procedures/processes. But failing to address these “surprises” may have significant adverse financial consequences.

In conclusion, I am reminded of Winston Churchill’s famous quote “If you're going through hell, keep going.” I encourage you to also pass this blog along to your C-Level executives to explain what is happening in the trucking industry and how it will affect your business. And use it to let others in your company know why the freight budget numbers aren’t looking good right now.

The good news is that there are some steps and strategies you can pursue to navigate through this storm. I will cover some of these ideas in future blogs. For those of you who can’t wait, you can always send an e-mail or give me a call.