Amazon, General Mills, and Tyson Foods said they increased prices in 2018 because of bottlenecks in trucking — namely, a truck-driver shortage. Procter & Gamble and Hershey’s said last year that they would have to increase prices in 2019 as well. But a softening freight market and a glut of trucking capacity are unexpectedly helping…
- Amazon, General Mills, and Tyson Foods said they increased prices in 2018 because of bottlenecks in trucking — namely, atruck-driver shortage.
- Procter & GambleandHershey’ssaid last year thatthey would have to increase prices in 2019as well.
- But a softening freight market and a glut of trucking capacity are unexpectedly helping sink freight rates so far this year.
Last year, retailer after retailer sounded the alarm on the rising costs of transportation — and how those costs would have to be passed onto consumers.
Procter & Gamble, Hershey’s, General Mills, Tyson Foods, Mondelez (which owns brands like Oreo, Chips Ahoy, and Nabisco), andotherconsumer-goods companiestold investorsthat they did or would jack up prices because of trucking bottlenecks.
“Transportation costs caught so many large manufacturers by surprise,” Dean Croke, the chief insight officer of FreightWaves, told Business Insider.
Retailers expected the same issues in moving goods in 2019. The truck-driver shortage — the US could have ashortage of 175,000 driversby 2026 — hasn’t lessened.Certaininefficienciesin the trucking industry,which moves 71% of the US’s freight tonnage, are still being resolved. And as for the trucks themselves, there’sa backlog of 300,000that transportation companies have not received.
Despite all that, the cost to move goods has plummeted so far this year. Van trucking rates sank by 13% from January 2018 to January 2019,according to DAT Solutions. Freight rates were down last month by as much as 5.7% from December.
One reason for the sinking rates is that while transportation companies boughta record number of trucksin 2018, the amount of goods needing to be moved has decreased. Spot-market trucking capacity was up 49% in January from the year before, while the loads that needed to be moved were down 34%, according to DAT.
Croke said the excess capacity was “driving rates down in most markets.”
“We’ve got this oversupply of trucks,” Croke said. “We’ve got this excess capacity on the market from a record amount of truck orders.”
A slowdown in goods being moved is foreboding for the overall economy, as it indicates people are buying less stuff.
But a result of lower trucking rates could be that the sticker prices of goods like toothpaste, chocolate bars, and hot dogs might not see the same hikes they did last year.
Have you noticed an interesting trend in logistics that no one is talking about? Contact the author email@example.com.
This is a subscriber-only story. To read the full article,simply click here to claim your deal and get access to all exclusive Business Insider PRIME content.