Rising costs put pressure on U.S. trucking company rates

Spot market demand remains at a high level, said Avery Vise, vice president of FTR Transportation Intelligence, a U.S. freight consulting firm. The sophistication of digital brokers and digital freight platforms allow for quick and accurate finding and booking of available capacity and keeping truckers running.

"Not all freight companies are taking [reduced] orders, and even with inflation, U.S. freight demand remains very strong." 

Rising costs put pressure on U.S. trucking company rates

While the U.S. trade press has been reporting on the weak freight market, what I've learned in talking to my industry peers is that at slightly larger trucking companies, hundreds of load orders are still being turned down each week.

Most of our freight peers say, "There's no concern about load volume. That's because 90% of the business is pretty much contract customers. Most shipper customers have indicated that they want to make their normal push for contracts in the third and fourth quarters."

Shippers are well aware that operating costs for truck routes continue to rise, and there is little relief in sight. It's not just fuel prices, but also the cost of maintenance, repairs, tires and other parts while the trucks are in service, and some suppliers have raised prices three to four times in the past year.

The cost inflation doesn't stop there, there's also the investment in company employees and increased driver pay to ensure freight companies can effectively compete for qualified drivers. (Logistics costs for shippers at stake - read more: Will truckers pay going up in the future?)

As costs rise, we focus more on improving service

Data shows that truckload contract renewals increased by an average of 10 percent in the second quarter. Shippers are also respectful and understanding of inflationary pressures. While rate increases are difficult for shippers to absorb, when it comes to cargo security and time-sensitive service, larger carriers are better able to give shippers a sense of security, which makes it less difficult for carriers to communicate pricing.

Looking ahead to the remainder of the year, WFFL's executive vice president said, "Our focus is to continue to invest in strengthening WFFL's transportation network in the U.S. East and to enhance our plans to upgrade our business at the customer service level. As we grow, we will enable our customers to have an outstanding experience regardless of the economic environment. As the supply chain continues to recover and overcome disruptions, the middle ground of our truckload shipments will be critical and shippers will benefit. We're in a good place."

Turning challenges into opportunities

In a market where cost inflation is eroding profit margins, large freight companies are having to do their best to operate efficiently and keep their cost per shipment as low as possible to ensure that prices are somewhat in line with the market.

Almost every customer is talking about the supply chain challenges they continue to face, even as the economy slows, and these challenges will become opportunities for transportation companies. That's why there's a greater emphasis on service quality.