“Ho-ho-hold onto your steering wheels. If you recall, for fleets and owner-operators, fourth quarter 2014 provided a welcomed year-over-year improvement compared to the same period in 2013, about a 5-7% increase in tonnage.” And while no single unified forecast of Q4 2015 has broken out just yet, recent history offers a window into what trucking outfits can expect during peak holiday season 2015.
Start with Bellwether firm United Parcel Service, which delivered more than 30 million packages a day during the 2014 peak holiday season, nearly double its non-holiday volume.
Trucking firms can borrow a page from what UPS learned last year about peak holiday demand. One of the keys to success for UPS: Making sure the company appropriately expanded its fleet with rental vehicles to handle delivery spikes.
How did those rentals pay off for UPS? Just look at Cyber Monday and Black Friday last year. Volumes were higher than anticipated on those critical days, yet UPS’ rental fleet expansions allowed the company to meet demand bumps efficiently.
According to The Wall Street Journal, “This year, the company plans to…adjust operations on Black Friday to ensure it meets demand and take another look at how to efficiently rent extra transportation.”
Preparation is the Best Defense This Holiday Season
What freight operations should expect between October and December depends on whom you ask. UPS isn’t taking any chances on capacity by shoring up with rentals ahead of the holiday rush.
Another good barometer of seasonal trucking demand is the National Retail Federation (NRF). While the NRF lowered its full-year 2015 retail sales forecast over the summer due to a weaker than expected first-half, its Q4 outlook is fairly bullish. NRF President and CEO Matthew Shay said, “…we are optimistic that consumer spending during the second half of the year will benefit from recent improvements in the housing and labor markets along with lower energy costs, and believe consumer confidence will grow enough to bolster retail purchases.”
In its own 2015 outlook, Commercial Carrier Journal (CCJdigital.com) ranked top trends that will have an impact on Q4 and peak holiday business. Here’s a look a some of those, and a few others, that fleets and owners need to stay aware of this season.
Maintenance costs are one of CCJ’s top factors affecting Q4. Citing the shortage of mechanics and the high cost of replacement parts, CCJ’s sources make at least a partial case for using rental equipment with solid Preventive Maintenance and service agreements. This takes the burden off of fleets and owners by leveraging the robust maintenance operations of large truck rental operations regionally and nationally.
Additionally, the cost of using those existing maintenance operations are typically lower than hiring one’s own mechanics, or utilizing small shops without economies of scale.
Bob Costello, chief economist and senior vice president at The American Trucking Association told the publication, “A lot of fleets have old equipment that is nickel-and-diming them to death. If you’re not replacing trucks, you’re in a really bad spot because your maintenance costs are going up significantly.”
To no one’s shock, the No. 1 factor affecting fleets and owner-operators this season is driver availability – a concern that is felt more acutely during holiday delivery spikes.
According to CCJ, “Fleets across the country are experimenting with new pay structures and incentives, and sign-on bonuses are making a comeback. Some fleets even are reporting double-digit percent increases in driver pay to recruit and retain new drivers.”
To wring the maximum profitability out of upcoming holiday demand, trucking firms and businesses need to attract extra drivers now and, in many cases, they’ll have to pay what the market will bear. Not doing so will almost certainly cause operations to miss out on delivery volumes that promise to be more lucrative this holiday season.
And what goes hand-in-hand with the need for extra drivers? Having extra trucks on hand by renting before the seasonal rush. Just ask UPS.