FTR’s Shippers Conditions Index (SCI) for December, as detailed in the February Issue of the Shippers Update, remains just above neutral territory at a reading of 1.9. FTR expects that the current benign environment will make way for rate and supply trouble for shippers as 2017 progresses. A steady increase in capacity utilization is expected through the year, climaxing early in 2018. The one uncertainty to this forecast is the ELD mandate, which may be tempered by the deregulatory forces of the Trump administration. Changes to the ELD mandate, though still unlikely, would alleviate some shortages.
The SCI is a compilation of factors affecting the shippers transport environment. Any reading below zero indicates a less-than-ideal environment for shippers. Readings below -10 signal conditions for shippers are approaching critical levels, based on available capacity and expected costs.
Jonathan Starks, Chief Operating Officer at FTR, comments, “Freight markets are currently operating at a relatively optimal level, with plenty of capacity to carry small increases in freight levels. This continues to give transportation managers the opportunity to focus on negotiating the best rates. However, the shipping environment is approaching a transitional time, with the potential for significant capacity shortages by the end of the year.
“Despite the rhetoric by the new administration to reduce the regulatory burdens on companies, the electronic logging device (ELD) rule is a safe bet to be implemented in December. As of now, the main uncertainty relates to the enforcement environment. Without a clear answer from an administration that is still in its infancy, shippers are wise to prepare for a full implementation, and to send clear signals to their carrier base that they need to be in compliance as well.
“One word of caution for shippers is to keep an eye on how your negotiated contracts would be impacted by a severe capacity shortage. It may be wise for transportation managers to begin thinking about securing capacity, rather than focused on a purely rate-based negotiation.”