As we head into 2024, the trucking, logistics and retail industries find themselves in a complex landscape characterized by economic uncertainty, fluctuating diesel prices and safety concerns. Questions about the financial health of the trucking industry, whether market volatility will continue and how it might affect consumers are front and center. The opening of Motive Holiday Outlook report offers valuable insight into what trucking and retail leaders face and provides advice on how to meet the challenges ahead.
Commodity status: Volatility remains
In 2023, the trucking and retail industries continued to level off after the pandemic-driven economic boom. The oversupply of capacity has shrunk and constrained the market, a trend expected to continue into early next year. Carriers should adjust their plans accordingly. A key metric showing improvement is driver retention, up 5% from 2022 to 2023. This improvement is particularly noticeable in passenger transport, retail and warehousing, where more drivers are choosing to stay with their current employers . The desire for stability is evident as carriers exit the market and new carriers begin a downward trend.
Diesel Price Fluctuations: Impact on Economic Health
Diesel prices, an important input for airlines, fluctuated significantly in 2023. These fluctuations were closely related to economic pressure in the industry. For every 50 cent increase in diesel prices, there was a 30% increase in companies’ financial stress. Smaller carriers are particularly affected by this as they struggle to keep up with rising diesel costs and revenues remain under pressure.
Mobile phone company off and on: Back to record highs
The number of carriers exiting the market increased in September, returning to the record highs seen in the second quarter. At the same time, new carrier launches fell 10%, in line with the overall trend in 2023. The market’s return to more balance between consumer demand and carrier capacity relies on factors over which it has little control, such as fluctuations in diesel prices, the total freight volume and interest rates.
Retail Status: Caution and delayed inventory build-up
Retailers are gradually restocking warehouses in preparation for the holiday season. Higher inventories are reflected in Motive’s Big Box Retail Index, which looks at the frequency of the company’s trips to retailer warehouses. Retailers that do not sell consumables such as groceries may already be matching inventories closer to demand, suggesting a step toward market stabilization. Retailers are more likely to increase inventory closer to the time they are needed, potentially creating slower pre-holiday periods as consumer confidence lags.
Safety Situation: A critical concern during the holidays
Safety is a primary concern during the peak holiday season, characterized by factors such as inclement weather and increased traffic. Severe weather and busy roads create a higher risk of accidents, with a 14% increase in critical speeding incidents over the holiday season last year. Truck collisions more than doubled on December 23, and accidents were associated with severe weather. Violations of operating hours they also tend to increase during the holidays.
Forecasting the Holiday Season and 2024: Navigating Demand Amid Uncertainty
As we look ahead to the new year, several trends and challenges have emerged – but there are ways to prepare:
- The truck market contraction is expected to continue in light of ongoing economic uncertainties and excess capacity left over from the pandemic.
- Diesel and insurance prices will remain volatile in the first half of 2024, requiring carriers to adjust to price fluctuations and excess capacity.
- Driver retention may continue to improve, reflecting a broader trend in the labor market with fewer people looking for job changes.
- With holiday demand relatively low, retailers are running leaner and keeping inventory levels low.
- Operational efficiency remains the key to success as carriers strive to maximize their bottom line in the face of market contractions, cost volatility and safety concerns.
As the holiday season begins, here are some actionable steps trucking, logistics and retail leaders can take to navigate the peak freight season and 2024:
- Improve efficiency: Look for opportunities to improve operational efficiency in all areas. The most seamless way to do this is to leverage a unified platform of integrated functions such as Motivation to combine driver safety, fleet management, equipment tracking and expense management in one place.
- Prioritize safety: Safety is more important than ever during peak retail, and therefore peak freight season, when events such as bad weather and busy roads are stacked against operators. Implement AI-enabled tools like dash cams, side and rear cameras that provide 360-degree visibility and proactively train drivers to make the roads safer for everyone this time of year.
- Evaluate cost structures: Conduct a thorough assessment of your cost structures, identifying potential areas for optimization and cost reduction. Evaluating cost structures allows you to make informed decisions based on a realistic understanding of your financial landscape.
- Contingency planning: Develop contingency plans that cover a range of scenarios, including best, most likely, and worst outcomes. This proactive approach equips your company to respond quickly and effectively to unexpected challenges.
By implementing these strategies, trucking, logistics and retail executives can take proactive steps to ensure the safety, productivity and profitability of their business during the peak holiday season and the uncertain year ahead.
Download Motive’s Holiday Outlook report.
About the author, Hamish Woodrow
Hamish joined Motivation in 2019 and serves as Head of Strategic Analytics, leading a team of research and data professionals to develop and deliver insights on the transportation industry, global supply chains and macroeconomic trends for clients and the broader market. Prior to joining Motive, Hamish served as a data scientist and consultant working in e-commerce and logistics. He started his career working in the energy sector, as an Engineer at Perenco (the largest independent oil company in Europe), working in facilities around the world on optimization problems. He holds an MSc from Imperial College London and a Masters in Engineering from the University of Bath.