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40 PalletCentral • January-February 2023 palletcentral.com We also emphasize the chance of a major recession, a downside exposure. We see that downside because of my fear of inflation's threats to financial markets and the alarming weakness of the other major global economies. Finally, in this step, one makes their best guess as to the probabilities of the various scenarios. Usually, the middle, or "base" case has a high probability, perhaps 66%. But in this volatile year, we surround the modest recession base case with a 30% chance of no recession and a 35% chance of a deep recession. at leaves 35% for the recession case. is range of possibilities may look like a forecaster's cop-out. We propose it rather as a strong statement about this year's uncertainties. Step Four: Having identified the uncertainties, it is now time to figure out what they mean. Using history, we can do that for the three scenarios identified here. We will do it for pricing. e upside case would maintain the current pricing trajectories, flat for spot, and gradually falling for contract. e recession base case would see a slide in both, at least 5% below the upside case. e bad recession case would mean prices down 10% for contract and 20% for spot. We can begin to make sense of the uncertainty now. e upside case doesn't mean much – just continue what you were doing in the fourth quarter of 2022. e recession case means to begin worrying and taking some serious action now. e bad recession means going to the bunkers. So this range of possibilities has a serious downward bias. All three mean a worse year for contract freight pricing. e bottom two mean the pain for spot freight markets. Step Five: is is the hardest and most important step. It belongs to your ownership or senior management. We suggest executives consider two things. e first is to pick a scenario for base planning. Given the above probabilities, that is a tough decision in 2023. It depends on the company's strategic position and the owner/executive's risk aversion. e second step is to plan to deal with the other scenarios. Again, remember, we just don't know which will occur, but we do know something about what might happen regarding each scenario. ere is no excuse for not being ready if events differ from one's base plan. It's all about uncertainty: What Noël has learned in 45 years of forecasting is that the task is about managing uncertainty. Most years, there is manageable uncertainty. In those years, planning is about resource allocation and business performance. e underlying market is stable. Any modest changes in market conditions require easy adaptations. In years like 2023, there is great uncertainty, just as there was in the major down and up swings in 2020. Forecasting takes work in such years: e task is to figure out where you are now; identify the certainties; identify the uncertainties; quantify them; make the proper tactical and strategic choices; then put in place the plans to deal with the important uncertainties that may occur. Economists and data help with the first four jobs. Management must tackle the last two steps, regardless of the discomfort and time demands. is freight market forecast from Noël is presented to you because freight gives you insight into the U.S. economy and provides indicators on how to plan for the uncertainties. e 2023 freight volumes are already, and most certainly will continue, decreasing from the extraordinary highs of the pandemic. ey are predicted to continue to fall until the end of 2023, thus requiring fewer pallets than the past 28 months. However, the freight volumes are not predicted to drop below freight market expansion, thus telling you that proper planning and adjustments should carry you through as infrastructure building begins and housing builds continue. Noël Perry's work is based on his 45-year career analysis of the full range of transport factors in the North American heavy freight market (truckload, rail, domestic water). His understanding of the influence of macro- economics on transport demand is unmatched. His analysis of trucking productivity includes innovative measurements of capacity utilization and the premier measurements of regulatory effects. Brent Hutto joined Truckstop.com almost 10 years ago and currently serves as the Chief Relationship Officer which includes ensuring the health of all of Truckstop.com's external relationships with hundreds of transportation technology companies. In his 24 years in the transportation and logistics industry, he has developed extensive experience covering the freight market. Hutto speaks broadly and has been published within supply chain media including the Harvard Business Review. The task is to figure out where you are now; identify the certainties; identify the uncertainties; quantify them; make the proper tactical and strategic choices; then put in place the plans to deal with the important uncertainties that may occur. Truckstop is a trusted partner for carriers, brokers, and shippers, empowering the freight community through a platform of innovative solutions for the entire freight lifecycle to increase efficiency, automate processes, and accelerate growth. As one of the industry's largest neutral freight marketplaces, Truckstop provides the customer service as well as scale of quality loads and trucks to give customers of all sizes, whether on the road or in the office, the transparency and freedom to build lasting relationships and grow their businesses. To learn how Truckstop is helping move the freight community forward, visit https:// truckstop.com.

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