Transportation industry has entered the calm before the storm

FTR reports that after 2015 the trucking industry will face an unprecedented range of outcomes over the next few years due to a growing chance of recession and the introduction of new safety regulations.

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The best transport executives embrace uncertainty because they know that most of their competition will shy away from anything risky about the future. When change comes, those organizations are already well down the road to adaptation.

FTR, the industry leader in freight transportation forecasting, reports that after 2015 the trucking industry will be facing an unprecedented range of outcomes for the next few years, due to the arrival of two powerful forces that could swing capacity utilization 10 percentage points in either direction. (See graph)

“A swing of just 5% is enough to dramatically impact pricing in the marketplace,” says Noël Perry, Senior Transportation Economist at FTR. “A swing of 10% – that would be a disruptive event, for both transport executives and supply chain professionals. There will be companies with their heads stuck in the sand; you don’t want to be one of those companies.”

A major negative force is the growing chance of recession, looming over a recovery that is clearly getting old and increasingly buffeted by the bad economic news coming from many global sectors. It is not an event that can be readily identified in advance, but we do know that the chances for it will be increasing. The positive force is the developing wave of new safety regulations that, if enacted, will push capacity utilization to the critical 100% level. Of course, the two forces could counteract themselves if they occur at the same time. However, that is a problem because it would produce historically high capacity utilization during a downturn. That may be good for truckers, but supply-chain pros will find it very difficult managing reduced budgets in a tight truck market. In addition, the ensuing recovery would likely strain the supply chain system to such a degree that shortages and price spikes would still be liable to occur. Real-time market insights will be critical for those who want to stay ahead of the curve and be able to take advantage of market opportunities.

Capacity, regulations and the overall economy will be part of the discussion at FTR’s annual Transportation Conference, held September 15 to 17, 2015 in Indianapolis, IN. Thought leaders from OEMs, Truck Fleets, Shippers, Intermodal, Railroads and Financial Institutions will converge to discuss and plan for the future of freight transportation in North America.