Every Wednesday, Diane McHaney downloads rate data from DAT into spreadsheets. As the pricing analyst for Barton Logistics, a non-asset transportation company based in Bandera, Texas, she applies statistical tools to identify trends in spot and contract freight markets.
Of particular interest is the mode — the most frequently occurring value in the data set. Also important is the standard deviation of DAT’s rolling 15- and 30-day spot market rate data. Both of these statistical tools help identify early signs of rate volatility.
One year ago, the analysis led McHaney and Criss Wilson, vice president of operations at Barton Logistics, to predict that rates would increase dramatically prior to December, 2017, as more carriers came into compliance with the electronic logging device rule.
Pricing would be much higher, they surmised, as ELDs took capacity away from small fleets and owner operators by lowering their utilization. Both now see the predictions were wrong.
“We have learned that quite the opposite of that is happening,” McHaney says. As more carriers implement ELDs, the rates are less volatile.
“(ELDs) are not having any effect right now,” Wilson says. “There is nothing that leads us to believe there is any volatility in the market right now.”
Wilson believes that any rate increases will come from the demand side of the equation, but demand so far this year has been “tepid and anemic.”
The last time Wilson saw positive volatility was November and December, 2016. This was to be expected during the peak retail season, but then rates “tanked” after the second week of January. Spot market rates have since recovered, gradually, but are still at a low average of $1.40 to $1.50 per mile, he says.Surprisingly, there has been more volatility with contract rates where the mode “is all over the place,” he says, but the volatility is not widespread. The DAT rolling 30-day average for contract rates has “pretty much flat lined.”
The data leads Wilson to believe that volatility in contract rates are short lived and limited to certain geographic regions.
As for why the ELD mandate has not impacted rates as many believed it would, Wilson points to “an underlying structural change going on in the market.” The change is motor carriers acting more like freight brokers.
Many of the top freight brokers in the market today began as motor carriers. These asset-based transportation companies have grown their brokerage divisions rapidly by managing more freight in lanes that their carrier operations can no longer service due to higher costs and lower utilization, some of which can be attributed to the use of ELDs, Wilson says.
Asset-based transportation companies hold a marketing advantage with shippers since they can directly control their equipment and drivers, but brokerage and 3pl firms have leveled the playing field with technology. Non-asset companies can provide shippers with the same, if not better, supply chain visibility, he says.
Barton Logistics, for example, would like all of its carriers to use freight tracking apps from Trucker Tools and MacroPoint.
“Carriers that resist using these free tools are not likely using ELDs either,” he says. Less than half of the carriers that Barton Logistics works with have not yet implemented ELDs, he estimates, based on their pushback when required to use tracking tools. “If you haul for Barton Logistics, you agree to use tracking tools.”