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Slowdown in the Supply Chain

Dec. 28, 2015
Things are about as good as they’re likely to get for shippers, at least for the immediate future.

Things are about as good as they’re likely to get for shippers, at least for the immediate future. Based on projections by transportation consulting firm FTR, the situation for shippers is likely to steadily sour throughout 2016, with expectations that freight haulers will institute increased pricing by the end of next year.

FTR’s Shippers Conditions Index (SCI) came in at a reading of -0.5, or basically flat, for the month of September, reflecting basically neutral conditions—neither good nor bad. Any reading below zero indicates a less-than-ideal environment for shippers, so based on how low the SCI has been over the past several years, a score of near-zero is a relative breath of fresh air. But shippers shouldn’t expect such benign conditions for much longer.

“There are definite signs of a slowdown in activity throughout the North American supply chain,” says Jonathan Starks, director of transportation analysis at FTR. “High inventories, weak manufacturing, and slowing intermodal moves are all indications of this slowdown. Slowing order activity from truck fleets for new tractors is another indication of the slowing market, as well as the fact that the driver shortage is less persistent than it was one year ago. It is a good sign that the economy continues to grow, and this weakness shouldn’t persist; however, that also means the coming regulations in 2016 and 2017 will have a greater impact if they occur when the market is more robust.”

Conditions indicate that weak pricing may persist throughout the winter, but Starks recommends that shippers keep abreast of regulatory action so they can best understand the coming impacts on truck capacity.

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