FTR Report Suggests Supply Chains Are Under Pressure

Business conditions for shippers appear to be on the precipice of a downward slope, according to the monthly Shippers Conditions Index from freight transportation consultancy FTR Associates.

The SCI for July, the most recent month for which data is available, was -4.5, which was steeper than June’s -1.8. 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.

FTR said that this current period commences what it labels as an “inflection point” in which costs and rates head up of the U.S. economy is able to sustain a mostly healthy freight market as new regulations go into effect.

The firm added that the forecasted tightening of capacity and associated rise in shipping costs will continue to have a negative impact on the SCI unless the economy’s recovery is sharper than expected.

In an interview with Logistics Management —a sister publication—FTR Senior Consultant Larry Gross noted that in previous months, conditions had been better for carriers than shippers although now the pendulum seems to be shifting away in making things more complicated for shippers barring further delays in Federal Motor Carrier Safety Administration regulations like CSA, HOS, and EOBR or a further decline in economic conditions.

“Carriers are finding that the past few months have been a little more difficult while there seems to be an adequate supply of truck capacity out there to meet demand at the moment,” he said. “That is why the SCI is not going up at the moment—or getting any worse.”

What’s more, the demand environment at the moment is “sensitive” because the economy is in a soft patch, Gross observes.

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