Using Load-to-Truck Ratios to Predict Shipping Costs

Executives use all sorts of metrics to plan for changing supply chain costs, but the load-to-truck ratio is often the first warning sign of upcoming rate fluctuations. The truck tonnage index, fuel pricing trends, and past rates can all help shippers plan for future costs, but the load-to-truck ratio tends to be a leading indicator; after all, it most directly measures capacity and demand against one another.

In this article, we’ll explain where the load-to-truck ratio comes from, how it’s calculated, and where users can access the data. We’ll also discuss specific details about carrier prices that this statistic’s trends suggest.

First, it’s important to understand what exactly the load-to-truck ratio is. Here’s the simplest way we can explain it.

What is the Load-to-Truck Ratio?

A load-to-truck ratio is a measurement of two figures: The number of loads on the market and the number of trucks available to carry those loads. Divide the number of loads by the number of trucks to get the ratio.

For instance, at the end of 2016, there were around 8.2 loads per reefer truck in the United States. By the end of the following year, the ratio stood at 14.1 loads per reefer truck, a lack of balance that led to higher carrier rates, stalled shipments, and a race to put more trucks on the road. (As of this writing, the reefer load-to-truck ratio has declined again — back to around where it was at the end of 2016.)

Of course, this definition brings up an important question. Where do these statistics come from? That is to say: How do we know how many loads and how many trucks are available at any given time?

In fact, there is no single load-to-truck ratio. That data doesn’t exist on a national level. Instead, there are different load boards, each of which could calculate its own ratio. The largest of these providers, at least in terms of database size, acts as a proxy for the trucking industry as a whole. To truly understand this key statistic, then, we need to discuss the provider.

DAT Load Boards and the Load-to-Truck Ratio

Before the late 1970s, load boards were literally bulletin boards posted at truck stops. Shippers and brokers would post their freight on note cards tacked to the board. Interested truckers could then find loads along their routes. It was an ad hoc system, and it worked up to a point, but there were clearly inefficiencies to be ironed out.

One of the earliest companies to digitize load boards was Dial-A-Truck. By 1995, the company — since rebranded as DAT, perhaps marking the move from phone contact to online service — provided real-time freight matching. According to company press, they were the first such provider in the U.S.

In the years since, DAT has expanded its services and products. They claim the “industry’s largest and most diverse electronic marketplace for on-demand freight.” This gives DAT unprecedented access to data, and sharing this data has become a big part of the company’s operations.

All of this brings us back to the DAT load-to-truck ratio. When industry analysts refer to the figure, they’re generally talking about a ratio built from the DAT databases. DAT publishes their data online, and provides paid services for deeper statistical collections and analysis.

Find the latest DAT load-to-truck ratios here.

The Strengths and Limits of the DAT Data Behind Load-to-Truck Ratios

According to DAT, their statistics come from databases that, in terms of market value, amounts to $57 billion. This includes all DAT transactions between shippers, brokers, and carriers. Meanwhile, the American Trucking Associations (ATA) report that the total revenue for carrying gross freight via truck was $738.9 billion in 2016.

So, measured in terms of market value, the DAT databases seem to represent about 1/13 of the total industry, or around 7 percent. According to DAT, this is enough to provide a roughly 90 percent correlation between the load-to-truck ratio and spot market rate trends. That’s significant, especially considering that this load-to-truck ratio does not factor in deals made outside of the DAT load boards.

Ultimately, this single statistic is just one part of a vast mosaic of data that executives can use to predict future market trends. As the figures suggest, though, the load-to-truck ratio is an important part of that picture.

Helpfully, DAT breaks down load-to-truck ratios by shipping method. That is, they provide one figure for dry van trucks, one for reefer shipping, and another for flatbeds.

h2>The Relationship Between Load-to-Truck Ratio and Rate Prices

When there are more loads that need moving than there are trucks to move them, load-to-truck ratios rise. We derive the general application of this statistic from a standard supply/demand relationship — as demand outpaces supply, price goes up.

Rising load-to-truck ratios usually foreshadow rate increases. Because DAT’s statistics are based on real-time data, and they update ratios frequently, changes in the load-to-truck ratio are often one of the first warning signs that shipping costs are trending toward a change.

This brings up an important point in application of these statistics. The particular ratio on a given day doesn’t really tell us anything; the data only becomes intelligence through close study of its changes. If the load-to-truck ratio in your market area has been rising over several weeks or months, expect carriers to raise prices soon. When the ratio begins to plunge, rate relief often follows close behind.

Other Statistics that Help Predict Changes in Freight Rates

Despite this focus on the load-to-truck ratio as an indicator of future rate changes in the U.S. supply chain, we by no means mean to imply that this figure is sufficient on its own. It’s just one of many factors that, together, make up the tea leaves executives must interrogate for insight into next month’s market realities.

In addition to keeping a steady eye on trends within load-to-truck ratios, shippers should also track many other factors. Here are a few of the leading numbers that can help predict changing shipping costs:

• Price Fluxuations for Diesel and Gas - Fuel costs contribute significantly to freight rates in the U.S. Electric trucks are still on the horizon, and petrofuels are subject to a wide range of market forces, with constant fluctuation. 

As of this writing, the U.S. is in a period of rising fuel costs. Expect this to have a direct impact on the costs of moving freight. Between September 2017 and September 2018, U.S. fuel prices rose by 17 percent.

Again, DAT Trendlines provides ongoing coverage of this figure. See the latest numbers here. 

• The Truck Tonnage Index - The ATA issue a Monthly Truck Tonnage Report, including an index that measures total load tonnage moved in the previous month in the U.S. For a fee, users can purchase these reports here.

The Federal Reserve Bank of St. Louis also tracks truck tonnage going back to 2000. Access that data here.

• Labor Trends - If you follow the trucking industry — or the new more generally — you’ve probably heard about the labor crisis. Carriers are offering higher wages and better benefits in order to attract new drivers; they’re likely to pass some of those expenses on to shippers.

• Recent Rate History - Recent trends in actual spot rates in various markets are strong predictors of tomorrow’s market environment. Visit the DAT Trendlines page (linked above) to track weekly, monthly, and yearly percentage changes in spot rates for vans, flatbeds, and reefer trucks.     

• Seasonal Changes - Like any industry, trucking fluctuates between busy periods and slower seasons. According to Global Trade magazine, peak season lasts between April and July, driven by the produce industry. Shipping volumes continue to increase between August and October, as retailers start preparing for holiday sales. In November and December, demand stabilizes, leading to more predictable rates. Finally, post-holiday slumps lead to the slower season between January and March.

Planning for future shipping rates allows businesses to prepare for market changes, giving them an edge over the competition. Note, however, that shipping is just one segment of the supply chain; material handling efficiency can help operations thrive even when freight rates take an unexpected turn.

Browse Solus Group’s collection of highly efficient, ergonomically designed material handling equipment here. These products help to ensure productivity and safety at every point in the supply chain, improving our customers’ abilities to keep their products moving even in the midst of a spike in the load-to-truck ratio and other surprises in the broader market.

References:

“Company Timeline.” DAT. DAT Solutions, LLC, n.d. Web. 18 Oct. 2018.

“DAT Trendlines.” DAT. DAT Solutions, LLC, 10 Oct. 2018. Web. 18 Oct. 2018.

Dorf, Peggy. “What is the Load-to-Truck Ratio?” DAT. DAT Solutions, LLC, 13 Apr. 2018. Web. 30 Sept. 2018.

“Industry Data.” Trucking. American Trucking Associations, n.d. Web. 18 Oct. 2018.

“Infographic: What Affects Freight Rates?” GlobalTradeMag. Global Trade, 9 Nov. 2017. Web. 15 Oct. 2018.

“Reports, Trends & Statistics.” Trucking. American Trucking Associations, n.d. Web. 15 Oct. 2018.