Four Truckload Procurement Strategies for 2025

The truckload transportation market has finally completed its latest business cycle.

While this cycle followed the typical pattern of inflation and peak, then deflation and valley, the coronavirus pandemic profoundly affected its duration and amplitude — and the way transportation procurement pros should view future pricing trends.

The COVID-19 cycle began in spring 2020 and lasted 48 months, a half year longer than each of the previous three cycles. At its peak, the year-over-year increase in national average dry van spot rates exceeded 50 percent. In the valley, the difference was a decrease of more than 30 percent. Previous cycles peaked below 40 percent and bottomed out with a decrease of between 10 percent and 20 percent.

Shifting Tides

Like a rogue ocean wave, the pandemic cycle had higher crests, deeper troughs, and lasted much longer than usual. This is important to remember as organizations plan for 2025 and beyond. Naturally, senior management will presume that the last 30 months of an inverted market (with spot rates below contract) will keep rolling. Truckload transportation has been a cost-saving machine for 2½ years. Why stop now?

Among the C-suite, most don’t appreciate the cyclical nature of truckload pricing. They need to know the tide is changing.

Truckload rates are always rising or falling. These inflationary and deflationary periods have different names — freight recessions, buyer’s markets, carrier’s markets, “bloodbaths” and the like — and each cycle has a unique set of peaks, valleys, and pacing. But rarely over the last 20 years have rates (spot or contract) stayed the same for an extended time.

Tactics For a New Cycle

So, as we exit a 30-month deflationary period and rates shift higher, it is time to adjust procurement strategies. Here are four things for shippers to consider, all designed to take some of the energy out of the wave of inflationary prices:

Focus on incumbent carriers. Shippers and carriers crave consistency. Consider pre-bid awards on key lanes to core carriers at reasonable target rates. Keeping incumbents on key lanes rather than subjecting these lanes to the open bid provides consistency of service to both shipper and carrier at a market-adjusted rate.

Reset expectations. Tamp down expectations for “savings” on bids. When the market is in or heading toward a deflationary cycle, raising savings expectations is appropriate. But now, rates should keep carriers committed during the upcoming tighter market. Saving a percentage or two during a bid can lead to service and capacity problems as the market tightens.

If company executives don’t believe you, introduce them to truckload pricing data for the decade or so before the pandemic. Benchmarking rates against the broader market is a better performance measure than year-over-year comparisons.

Consider longer contracts. Carriers might be interested in shorter contracts right now, just as shippers preferred them when the market loosened. But pairing a longer contract with pre-bid award language could provide both shipper and carrier with some level of consistency with a flexible rate mechanism.

Recalibrate your carrier mix. It’s tempting for an organization to reduce its carrier base during a deflationary period to leverage volume with the ones it wants to keep.

But you do not want to be caught short when the market tightens. Instead, consider awarding multiple carriers some level of business throughout the cycle. You’ll have more carriers to flex if your demand increases. Similarly, make sure you have a mix of asset and non-asset providers to leverage as the market tightens.

Find Opportunities

Whatever you do, keep your eyes on the horizon. A shipper’s approach must match the upcoming market conditions for the next four to six quarters, not the past 2½ years. In 2025 and beyond, truckload capacity will tighten, and rates will rise (though not at the extremes of the last four years).

It’s still a good time to be a shipper. But you should focus on finding opportunities for saving and improving efficiencies in a hardening market — and keeping your company’s C-suite apprised of your priorities as this new cycle begins.

(Photo credit: Getty Images/Milos-Muller)