Chart of the WeekMarket InsightNews

Capacity shrinks due to lower supply, not increased volume

SONAR Chart of the U.S. outbound tender rejection index versus the outbound tender volume index moving in opposite directions.


Chart of the Week: Outbound Tender Volume Index, Outbound Tender Rejection Index – (SONAR:OTVI.USA, OTRI.USA)

Freight volume is not the only thing that impacts trucking capacity in the U.S. Tender rejection rates (OTRI.USA) have increased 13% while national volume (OTVI.USA) has decreased 0.8% since October 25th.

As we approach Thanksgiving there is a natural sense of urgency for shippers to fill distribution centers in order to get the stores supplied with enough inventory to allow for easy replenishment during the heavy shopping period around Black Friday. This is not only necessary for Thanksgiving week, but also the subsequent weeks as inventory drops rapidly. Inventory management during this time is crucial as vacations will limit availability of trucks for a period when demand for ad hoc equipment is high.

The transactional (spot) market reflects this each season as spot rates are driven higher preceding Thanksgiving and tend to drop for a week or two until spiking again before Christmas. Volume is not the only factor that affects rates in the market. The supply side mechanics of driver availability has just as big of an impact as volume. The issue is that most of the year driver availability is relatively consistent. Drivers will work though many of the other holiday periods to earn more money. Thanksgiving and Christmas are less appealing as they are considered “family” holidays.

The supply side is less visible in the industry and many will apply the logic that it must be a surge of volume due to the increasing rates or activity depending on your role. Shippers have no visibility to the supply side. They tend to assume volume drives most things since they are dealing with demand side economics most of the time. Even inside the carrier organization, very few individuals have visibility to total driver availability. Many big carrier fleet managers only operate a small percentage of total drivers and the smaller carriers do not have enough size to make a representative sample.

The fast pace of holiday retail shipping can also make it feel as though volume is surging as it gets busier and more frantic. Service requirements are tight and last-minute shipping is more prevalent during this time of year doubling the impact to rates.

Volume has a great impact on capacity most of the year, but the supply of drivers and trucks is much more difficult to see even though most of us will be on the same vacation next Thursday.

About Indices presented in this article

(SONAR: OTVI.USA, OTRI.USA) Outbound Tender Volume Index – USA – Outbound Tender Volume Index is an index that assigns a value to each market based on load volumes on March 1st of 2018. For example: If OTVI.ATL had a value of 100 on November 2nd and and value of 110 on November 3rd, load volumes increased 10% in a day.

(SONAR: OTRI.USA) Outbound Tender Rejection Index – USA – The Outbound Tender Rejection Index is the rate at which carriers reject their contracted load tenders. For example: If a shipper sends a carrier 10 loads and the carrier rejects 2 of them, the OTRI value would be 20%.

About Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real-time. Each week the Sultan of SONAR will post a chart, along with commentary live on the front-page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry- in real time.

The FreightWaves data-science and product teams are releasing new data-sets each week and enhancing the client experience.

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Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also a one of FreightWaves’ Market Experts. With a degree in Finance, Strickland spent the early part of his career in banking before transitioning to transportation in various roles and segments, such as truckload and LTL. He has over 13 years of transportation experience, specializing in data, pricing, and analytics.

One Comment

  1. I noticed that, as a Broker, you did not comment on the the fact that Shippers are continuing to try to drive the cost of trucking to $0 and they do not care if the carriers are making money. In a sense they are cutting their own throats. As a Broker, if a shipper pays a fair price to move the loads, I guarantee there will be trucks to move their products. You fail to state the fact that because shippers are expecting dirt pricing, that carriers are refusing to take their loads and only take the loads that pay the proper amount for carriers to stay in business. the industry needs to wake up before they ruin the the industry. Black Ops Logistics, LLC!