We're In the Midst of Trucking Bloodbath 2.0

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, you know, we've been talking about supply chain and logistics questions for years, and it's nice because we're now starting, you know, we talked about the bullwhip effect, big time theme, but we're actually starting to see like the opposite sides of these cycles in pretty extreme degrees than the first time we started covering them.

Tracy Alloway (0:36)

Yeah, well, for those who don't remember one of our favorite things ever, the bullwhip effect is this idea where you have these small changes or sometimes large changes in customer demand, and that sort of ripples through the rest of the supply chain. So all the way through to retailers and suppliers and manufacturers, and it feels like we are seeing, as you said, Joe, the reverse of some of the first ripples that we saw. So if you think back to the pandemic, there was an expectation that people weren't going to buy anything, and so we had a lot of retailers and manufacturers who cut back.

But in actuality, people who were stuck at home did end up buying quite a lot. And so everyone had to scramble to get things to them, so to produce the goods that people actually wanted at that time. We saw inventories start to build up, and now there's the question of whether we're seeing all of this go into reverse.

Joe Weisenthal (1:30)

Yeah, and we're recording this on May 2nd, and last week, both of us were spending a lot of time reading through earnings calls, and my interest was sort of on the inflation consumer pricing standpoint, but basically every company I saw said, the one area where they're definitely seeing easing is in freight costs.

Tracy Alloway (1:50)

Yeah.

Joe Weisenthal (1:51)

They all said that.

Tracy Alloway (1:52)

Although, you mentioned pricing, and this is something that we've been interested in for a while now, but this idea of price over volume.

Joe Weisenthal (2:02)

Yeah.

Tracy Alloway (2:02)

And if companies are sacrificing volume in order to jack up prices, or making that up with price increases, then it suggests there are fewer goods moving around, right? Which you would think would be bad for the companies that actually move and ship those goods.

Joe Weisenthal (2:19)

I think it definitely has been, and I think if you look at the lines of any sort of truck or freight pricing index and also ocean freight, it's pretty far down. So we're gonna dive into what's going on. We know the lines are down for freight pricing, but the question is how much of this is a trucking or freight specific story oversupply leading to undersupply leading to oversupply of capacity versus something that says something about the broader economy. We have two guests, our friends from FreightWaves. We have Craig Fuller, founder and CEO of FreightWaves, who we first talked to, I think, two years ago, and Rachel Premack, editorial director of FreightWaves, who recently wrote a piece declaring Trucking Bloodbath 2.0.

Thank you both for joining us. Rachel, wait, what was Trucking Bloodbath 1.0?

Rachel Premack (3:07)

Yeah, so in 2019, the trucking industry went into a recession, really as a result of a lot of these Trump tariffs. A lot of manufacturing in the US started to really slow down, and as a result, that caused this slowdown more broadly in trucking.

This bloodbath we're seeing right now is more on the, I would say, more on the consumer side rather than strictly on the manufacturing side. But yeah, just generally when we see these big drawbacks in various industries, that results in drawbacks in the trucking industry as well.

Tracy Alloway (3:42)

Yeah, so this is a notoriously cyclical industry, and I'm glad we started out with Trucking Bloodbath 1 because that kind of encapsulates the idea.

But what are we seeing in terms of the data now? Because there are all these different cool charts that FreightWaves especially puts together, all these different things you can look at, like the outbound tender rejection index, things like the contract load accepted volume index. Walk us through what you're seeing in terms of the numbers.

Craig Fuller (4:12)

Yeah, if you look at what's happened in the trucking industry, and this also happened in 2019, so not only did you see a slowdown in volume related to sort of the industrial economy, but you also saw an overbuild of capacity. So there was an ELD mandate, which really regulated the logs or how many hours the driver and the monitoring of those hours the drivers could have in the truck.