Capacity Crunch: The Structural Shift in Trucking
As the trucking industry navigates a prolonged capacity crunch, experts are debating whether this market cycle is different from previous ones. Aaron Graf, CEO of Triumph Financial, believes that increased litigation, regulation, and legislation are acting as barriers to entry, preventing the surge of new capacity seen in previous upturns. This fundamental shift suggests that the current tight market conditions might persist longer than anticipated, impacting profitability and driver availability.
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Triumph CEO and founder Aaron Graf pointed out that the current trucking upcycle is more structural than cyclical. ‘In the last cycle, it was whoever had the cheapest capacity that would win,’ Graf said. ‘They would put unqualified, undocumented, unverified people into trucks.’ However, today’s environment is vastly different. ‘You’re getting paid $2,000 to move freight, but you might be still staring at a $30 million verdict on the back end of it,’ Graf noted.
Graf cited data from Triumph’s factoring business, which represents 15% or more of the entire market. The average invoice size in that business rose 26% quarter over quarter, while Triumph’s customer count actually grew 4%. Graf noted that fewer loads were tendered to owner-operators in the 1-to-4 truck segment, suggesting that this cohort exited the market and drove the supply tightening rather than any meaningful increase in demand.
Regarding brokerage margins, Graf said Q1 saw compression as contracts broke down, but by Q2 the gross dollars brokers earned per load increased because load sizes grew faster than margins fell. Broker margins compressed to between 10% and 12% for brokers Triumph tracks, but the actual dollar revenue per load still rose. Graf used a straightforward example: a 15% margin on a $1,500 load yields $225, while a 10% margin on a $3,000 load yields $300.
Graf also highlighted the importance of internal efficiency improvements. ‘We’ve eliminated more than $30 million in internal inefficiencies,’ he said, crediting the prolonged soft market for forcing the company to look inward. On the payments side, Triumph now touches 65% of all brokered freight and is running at approximately $54 billion in annualized payments. The total addressable market for brokered freight has been resized from $110 billion to $135 billion due to inflation.
Triumph’s LoadPay product, which Graf described as starting as ‘the idea of Venmo for trucking,’ has expanded into a digital business companion for carriers. It offers a virtual wallet with 24/7 instantaneous funding through partners including C.H. Robinson.
Looking ahead, Graf said the market is ‘more brittle’ than many realize. ‘Any uptick in demand could push rates higher still given the lack of available, properly verified capacity,’ he warned. Graf added that even at current revenue levels, small carriers are not generating significant profits once diesel costs and equipment input costs are inflation-adjusted, leaving little incentive for aggressive re-entry into the market.
