As we dip our toes into the holiday season freight for this year, a slight uptick is of course expected from the usual summer rates we have been experiencing. As we look back into the not-so-distant past when rates spiked out this past spring and into early summer, the general spot rates have held strong until recent, but not quite where they peaked out previously this year. From what I have observed both locally and nationally, an influx of new carrier authorities may be one of several underlying factors that have contributed to this fluctuation.
As the ELD mandate and strong freight took hold early in the year, mixed with ideal post-recession economic conditions, I noticed a lot of new MC numbers on trucks that I observed on the road. Its not hard to spot if you pay attention to the sequential format that MC numbers are usually issued in, making note that newer MC’s started over once they hit the “999999” back around early 2016, starting over in the “0*****” format and counting up from there. What this led me to conclude was that there were a lot of company drivers, leased owner operators and even those with no experience that decided to startup on their own authority during these peak conditions we witnessed in the past year.
As capacity has been crunched for years, this influx of new carriers was a welcome change for most shippers and brokers alike. Unfortunately for the rate side of things though, a lot of new authorities most likely resulted in a deflation of rates from their peak of sorts. You may wonder after reading that, “How could a bunch of new carriers result in declining rates?” The answer is a direct relation to the fact that a lot of the new carriers simply lack the experience and education when jumping onboard going into business for themselves. This was an observation I’ve had both by a good amount of talking to new carriers in person “on the ground” and online, both in forums I belong to and through private messages originating from these groups. It is simply one facet to the “rate game” going on that a good amount of these new carriers are simply undercharging and underbidding out of self-preservation and not carefully analyzing what it takes to succeed in the long-term as a motor carrier.
Since freight is cyclical in nature to an extent, we can once again expect to see a drop in freight volume post-holiday season through the winter and on into early spring. The true proving ground and measure as a successful carrier will come to those with new authority during this time. With such a large number of new carriers, I would speculate that we may see a “weeding out” of those carriers that failed to charge enough during peak season to build up their reserves, then as a result struggle through the winter when freight is sparse. It is not too late for those carriers however, if they take the time to educate themselves on rates and load-to-truck volume and take advantage of it during the upcoming holiday push.
You may not realize that a little bit of change goes a long way in this industry and we all have an effect on it as a whole, especially when it comes to rate fluctuations. As they say “One bad apple spoils a bunch!” Not that new authorities are a bad apple by any means, but one that doesn’t help uplift our rates and instead starts the race to the bottom can spread like the plague in a world where a few cents per mile can separate success and failure! With a record number of new authorities confirmed in recent years by statistics, this influx of carriers continually undercutting rates through ignorance may unknowingly be their own undoing this winter. To further speculate on this trend, I could also see it leading to another slight uptick next spring from strained capacity, should history repeat itself for volume and economic conditions and the loss of these carriers through attrition during the next slow season. Take the time to ask questions, educate yourself on rates and help better not only your own business, but the stability of freight rates in general industry-wide.