The Value of Trucking Demand Visibility
Why demand visibility is more valuable than capacity visibility
The trucking industry faces challenges in monitoring capacity shifts and demand fluctuations. Total tractor counts from for-hire fleets have grown by 18% since December 2018, while never increasing more than 2% a month. However the Outbound Tender Volume Index (OTVI) has grown 12% over the same period, with monthly fluctuations that can exceed 20%.
This highlights that demand changes much more rapidly and is unpredictable over time. The process of ordering and seating a truck takes close to a year, and even if capacity grows, it only marginally increases the chances that loads will be covered. Knowing where and when demand is changing is critical as it will determine the growth or decline in transportation availability. Changes in relative demand matter just as much as, if not more than, aggregate demand.
Examining the values of outbound tender market share, which gauge market demand for each of the 135 markets in the United States, reveals that Southern California volumes have dropped considerably compared to Houston and Detroit. Houston is located more than 1,500 miles away from Los Angeles, making it extremely challenging to reposition trucks and drivers quickly. These relative changes in demand are just as important, if not more, than overall demand when it comes to transportation.
We already have the answer we need
Demand-side indicators provide the earliest signs of market shifts, while rejection rates and spot rates are crucial in determining the relationship between supply and demand in trucking.
Tender rejection rates are now under 4% as opposed to 20% in December 2021.
Tender rejection rates (OTRI) and spot rates (NTI) measure when capacity is meeting demand in the contract and spot markets, respectively. These measures answer the two most important questions that companies want answered: Can I get a truck and how much will it cost me?
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