FTR Shippers Conditions Index reflects tough capacity outlook

The ongoing issue of tight over the road capacity and how it is negatively impacting shippers’ supply chains was evident in the most recent edition of the Shippers Conditions Index from freight transportation consultancy FTR.

FTR describes the SCI as an indicator that sums up all market influences that affect shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”

For the month of February, which represents data for the most recent month available, the SCI was -8.8. FTR said that this reading is indicative of capacity tightening earlier than usual due to the impact of harsh winter weather at the end of last year and the beginning of this year, adding that it expects conditions to improve should if a slowing of freight growth persists. But the firm cautioned that comes with the caveat that shippers should acquire sufficient capacity through the spring seasonal shipping peak as 2014 could be a “very volatile year” that requires shippers to pay extra attention to market conditions.

“Most of the components in the Shippers Conditions Index are only slightly negative (freight, costs, and fuel),” said Jonathan Starks, Director of Transportation Analysis for FTR, in a statement. “The main drag comes from the very tight capacity situation that was highlighted this winter. This is a year to closely monitor signs for an economic uptick because it could have quick impacts on the transport sector. If the economy stays stuck in slow-growth mode and the weather finally behaves, we can expect the extremely tight capacity to normalize by mid-summer. If, however, we can finally get some additional economic activity, especially in the vital manufacturing sector, the tight truck environment will persist and could significantly worsen. Now is a time for careful planning for the quickly approaching fall shipping season.”

As previously reported, Starks’ points have been resonating in the freight transportation market, with many brokers pointing to how shippers’ supply chains were several days, if not weeks, behind, due to the harsh winter weather conditions, especially at the beginning of the year. This led to shippers looking for more loads than usual in February, too, with February traditionally viewed as slower than most months.

This was highlighted by BB&T Capital Markets analyst Thom Albrecht in a research note. Albrecht wrote that weather’s impact to trucking is numerous, ranging from lost volumes (impacting both mileage utilization and revenue), increased fuel burn due to idling, higher insurance and claims, and a litany of other expenses such as snow removal, lodging, towing, detention and layover pay, body repairs, engine and other cab-related repairs, higher repositioning costs, etc. And he also pointed out that there were numerous instances for all carriers in which a scheduled shipment was at a location shut down by snow or deliveries with the same unavailability.

FTR’s findings were confirmed by Jeff Brady, director of transportation and logistics for Harry & David, a multi-channel specialty retailer.

“We are seeing a tightening, much earlier than normal, this year in terms of capacity,” explained Brady. “As a highly seasonal shipper, and one that requires temp controlled capacity; it is usually available this time of year. But it’s very tight this year, even ahead of produce season on the West Coast. I believe this is because of the conflux of HOS, a shrinking carrier base and a true contraction in long haul trucking. I don’t necessarily buy the so-called economic recovery aspect but regardless we’ve got serious challenges in our industry that need to be addressed.”