Adapting to change: More trailers over tractors


The capacity crunch is driving carriers to buy more trailers than trucks. Here’s how the shift is impacting the transportation environment.

As the 2020 holiday season comes into focus, it’s becoming clearer that the uptick in e-commerce orders, the persistent supply chain shortages, and reduced transportation capacity could turn into a “perfect storm” of challenges for companies across many industries.

“The 2020 holiday shopping season will close out an intense, unpredictable year for retailers and consumers alike,” the National Retail Federation (NRF) writes. “With ebbs and flows in retail sales and COVID-19 infection rates, retailers are entering an unprecedented holiday season.”

NRF expects 2020 retail sales overall to grow by 3.5%-4.1% to over $3.9 trillion despite uncertainty from the lingering trade war, coronavirus, and the presidential election. The U.S. e-commerce sector has become a force of its own during this period. Already growing year-over-year, U.S. e-commerce sales grew by 43% in September 2020 after increasing by 42% the prior month.

“Both FedEx Corp. and United Parcel Service Inc. have told some of their largest shippers that most of their capacity is already spoken for and that any extra trailers with holiday orders will have to wait to be picked up, according to shipping consultants and retailers,” WSJ reports.

“Overloaded carriers are struggling to keep up with the expected surge in online orders during the peak holiday season.”

Managing the Frenzy

The trucking industry has been thrown into a frenzy as it works to address current challenges while also preparing both for the looming holiday shipping season and for what 2021 will bring. E-commerce velocity, for example, is expected to remain strong into the coming year as—even when COVID is no longer a threat—more consumers shop online versus visiting brick-and-mortar stores.

To adjust to these new realities, carriers appear to be acquiring more trailers than trucks right now. “Tender rejection rates continue to hover around all-time highs as carriers struggle to cover the recent freight boom, driving rates and revenues higher,” Freightwaves reports. “The last time this occurred carriers rushed to purchase record amounts of equipment in 2018. But this time around, trailers are the equipment of choice over tractors.”

The publication says preliminary trailer orders for September will be the third-highest month in history at 52,000 units. “This is part of a five-month trend of increasing dry van trailer orders that began in May of this year,” it says, noting that for the year overall, trailer orders are growing in relation to tractor orders.

“Trucking companies are having to adapt like many other businesses to an environment filled with questions about the near future. Investing in trailers over tractors is a far safer bet due to lower costs and the fact that they do not have to hire a driver to utilize them,” Freightwaves points out.

“The growth in trailers over tractors suggests carriers are more willing to drop empty and loaded trailers at shippers and their consignees instead of waiting at their facilities,” it adds. Under “normal” circumstances, carriers pick up loaded trailers after placing the empty ones—a process known as “drop and hook.”

Drop and hook is easier to manage if the carrier has spare trailers to work with as it “leads to fewer wait times that drain driver productivity,” Freightwaves explains. “This is also good for social distancing, which may also be contributing to the trailer pool growth.”

“Trucks aren’t Where the Loads are”

Commenting on the rush to acquire trailers that’s happening right now, DAT iQ’s Dean Croke told Talk Business & Politics that the old adage, “Trucks aren’t where the loads are,” is applicable right now because trucks are more likely to be running more empty miles and spending more time at the loading dock. “There’s a tendency to move light loads to drop trailers,” Croke says, “creating a backlog of equipment through networks.”

“When you’ve got a massive influx of e-commerce freight on a loading dock on the inbound side, you’ve got a big back up of trailers,” he continues. “The trailer people are telling us they’ve never had a higher utilization level of their trailers because they are both in demand and being used as on-site storage as they try to process this surge in demand.”