Shipping Conditions Will Get Worse before They Get Better

Companies expecting to find carriers who are ready, willing and able to offer their transportation services this fall might want to rethink their logistics strategies. According to one index of shipping conditions, the situation for the rest of the year will be one of rapid deterioration when it comes to available capacity.

FTR Associates’ Shippers Condition Index (SCI) edged lower in July to a current reading of -3.8 (yes, that's a negative 3.8). The SCI sums up all market influences that affect shippers; a reading above zero suggests a favorable shipping environment, while a reading below zero is unfavorable. After a brief term of improving conditions for shippers, FTR’s SCI has now once again begun to fall as had been expected.

The deterioration reflects the current trucking situation, in which demand has completely utilized the available fleet capacity, leaving little room for even modest seasonal increases in activity. FTR is forecasting a declining environment for shippers through the remainder of this year and well into 2012.

“Events are unfolding as we had projected with regard to shipping conditions. Carriers have right-sized to meet current demand levels and are reluctant to add capacity given the high level of economic uncertainty,” says Larry Gross, senior consultant for FTR. “Moreover, tightening driver availability means that even those truckers that wish to add capacity are finding it difficult to do so. The result is higher freight rates even in the face of the soft economy.”

Gross expects this situation will persist into next year as expected new government trucking regulations will reduce the productivity of the trucking industry, and therefore its effective capacity.