Home Safety Apparel Increasing truckload length of haul suggests shippers have overordered

Increasing truckload length of haul suggests shippers have overordered

Chart of the Week: Outbound Average Length of Haul– USA SONAR: OALOHA.USA

Demand for longer-haul capacity has grown significantly over the past five months, driving the average length of haul for truckload tenders 10% higher. An unseasonal increase in this index is indicating shippers are seeing easing demand at the personal consumption level, are still trying to build inventories or both.  

The Outbound Average Length of Haul index (OALOHA) measures the average distance between the origin and destination of a truckload request from a shipper. Shorter lengths of haul favor upstream or raw material moves in the manufacturing cycle of the supply chain and order fulfillment closer to consumption in the retail sector.

Longer lengths of haul are indicative of inventory replenishment, either of raw materials on the manufacturing side or of finished goods on the retail side. It is typical to see greater lengths of haul in early spring and early fall as shippers import goods for the major consumption and production seasons during the summer months and leading into the winter holidays. 

The recent freight boom has been driven largely by an increase in consumer spending on retail goods. A strong housing market and a transition to a work-from-home environment have led to an increase in spending on furniture, appliances, electronics and other home improvement items. The industrial manufacturing sector lagged in its recovery and has been limited by commodity availability. In other words, most of the goods being moved still favor the retail end.

Over the past three months, requests for capacity for loads moving more than 800 miles have increased 6.5%, while tenders for loads moving less than 250 miles have declined by 10%. This could indicate that shippers have overordered as consumption wanes in the wake of expiring stimulus packages and runaway inflation.

This by no means is an alarming transition indicating we are headed into an economic freefall, but more of a transition away from an unsustainable period of personal consumption growth.

Inflation, both upstream and at the consumer level, is growing at a record pace. It is bound to tamp down consumption at some point. The biggest concern is how this will impact economic stability over the next year. 

Shippers reacted to scarce product and capacity by ordering as much as they could in a large-scale panic-buying spree. This is not unlike what happens at the personal consumer level when there are shortages of commodities like toilet paper in the beginning of the pandemic or gas when the Colonial Pipeline was hacked earlier this year.

When inventories get too far below demand, inflation takes over and the market regulates naturally. This is a normal process, but overcorrections can be painful with warehouse space becoming increasingly scarce and subsequent prices on the rise.

Companies will have to start investing more time and energy than ever in managing their supply chain logistics as forecasting demand continues to be a growing challenge.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.

To request a SONAR demo, click here.

Most Popular

FEATURE: Managing the micromobility boom

More e-scooters and bicycles on our streets mean lower carbon emissions and better last-mile connections, but with them come new traffic management and safety...

Technology-enabled mobility: Five predictions for 2023

Carol Schweiger, Intelligent Transport Advisory Board Member and President of Schweiger Consulting LLC, shares her expertise and perspectives on the challenges and opportunities within...

IndyGo Foundation secures grant for Near Eastside bus stop upgrades

The $500,000 grant will allow IndyGo Foundation to enhance bus stops on Indianapolis’ Near Eastside, improving accessibility and safety for vulnerable populations. Credit: IndyGo IndyGo...

4 Reasons to Hire A Professional Chauffeur in London

If you are travelling to the UK capital, good for you since London is one of the most beautiful places globally. The phenomenal museums,...