FTR Tells Supply Chain Managers to Get Ready for Demand Shift

The business conditions outlook for shippers appears to continue to be moving sideways, according to the monthly Shippers Conditions Index (SCI) from freight transportation consultancy FTR Associates.

The SCI for September, the most recent month for which data is available, was -6.9, which FTR said was almost exactly in line with August. A reading above 0 suggests a favorable shipping environment, and FTR describes the SCI as an indicator that sums up all market influences that affect shippers, with a reading above zero being favorable and a reading below zero being unfavorable. May 2011’s -11.4 was the worst SCI reading of this current economic cycle.

According to FTR, the range where the SCI “settles” indicates the current status of stable but slightly tight truck capacity, adding that shippers may see a bit of deterioration in shipping conditions through the end of 2012 and throughout 2013, while freight demand slowly improves and regulations such as CSA and HOS have a negative impact on driver production and in turn capacity.

“Shippers continue to enjoy a period of stability and limited increases in trucking rates for the moment,” said Larry Gross, FTR senior consultant, in the report. “Uncertainty with regard to the future will continue at high levels until the outcome of ongoing ‘fiscal cliff’ negotiations becomes clear. We are optimistic that the results of these discussions will not inflict great damage to the economy. With the re-election of President Obama, we can expect the current regulatory climate to remain in place. The conditions are therefore set for slow tightening in freight markets as we move through next year.”

In an interview with Logistics Management—SCMR’s sister publication—Gross explained that this report accentuates how while conditions have not changed, it stands to reason they will.

While there is a program in place for conditions to change that is visible, Gross said that continued growth colliding with the various restrictions being programmed into certain regulations will likely create a different situation for shippers by this time next year.

“If we do in fact go off the fiscal cliff, the forecast of a tightening supply in trucking is likely obsolete as a recession could follow and there would not be as much demand,” he said. “I am assuming there is a solution and that people in Washington are not so stupid as to drive us off.”

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