High Rates and Tight Capacity Land Another Blow to Shippers
Mike Tyson — everyone knows his name. Famous for his boxing record of 37-0, Tyson faced off with Buster Douglas in 1990, a match that would become one of the greatest upsets in sports history. In fact, when Tyson and his corner entered the ring that match, they were so confident in another early round knock out that they didn’t even pack ice or end-swell. By mid/late rounds the swelling over his eye blocked his vision and Mike was caught with an upper hook that knocked him out for the first time in his career. Meanwhile, Douglas, even after being knocked down, maintained focus on his strategy – to outlast Mike. By perfectly executing his plan, Buster was, against all odds, able to come out on top.
2020 feels a lot like that match. We entered the ring feeling confident, and halfway through we’re standing here like we took a punch to the face. Many subscribe to the Mike Tyson theory that “everyone has a plan until they get hit in the mouth.” And it makes sense; all 37 boxers that went up against Tyson had a plan and were so stunned after Tyson hit them that they questioned their own strategy. Being stunned led them to lose their focus, lose their follow-through, and left them unable to execute their plan. That’s why it’s not only important to have a plan, it’s important to execute it, and it’s important to persevere.
In the face of continued uncertainty, decreased trucking supply, and increased trucking demand, many shippers are wondering what they should do now. For midsize and small businesses, it all comes down to being a little more like Buster Douglas; it all comes down to being even more committed to impacting the areas that they can control.
Current Transportation Markets
In July, we predicted a continuation of higher rates as a result of tightening capacity and increased demand. At the time, the DHL Carrier Power Index has reached 65; since then, it has only continued its upward trend and now rests at 80. In fact, rates have continued to trend upwards and many are now higher than rates at the same time in 2018. With another week of the same upward movement, many are beginning to believe that this may be a permanent change. Spot rates now exceed contract rates, and contract rates are expected to trend upward as a result.
While all signs point to even higher rates, there’s no reason to give up hope for lower rates. As we get closer to the top of the trend, we will most likely see rates begin to trend down. Take into consideration that carriers cannot stand to leave equipment idle when rates are this high. As more equipment and drivers get back to the streets to participate in these rate levels, peak shipping season will be nearing an end. Between these two changes, a reduction in rates below current levels is imminent.
LTL carriers remain swamped in areas around the county, with many beginning freight embargos for certain cities until they can get caught up. Some carriers, like YRC freight, are now restructuring single item pieces to be under 12’.
LTL carriers have also started to provide the same rate and tariff to all third parties, meaning that some will see an increase in rates while others will see a decrease. If this trends with other carriers, the entire 3PL LTL market could change.
Trans-Pacific volumes are continuing to pick up. As more companies shift products and stock up for the retail season, the west coast ports are seeing increased volumes. This is leading to higher ocean rates from Asia, longer unload times, longer wait for port times, longer transload times, as well as increased inland transportation costs.
Longer unload times, longer transload times, and higher truck rates from California ports will likely be a factor in the coming weeks. Consider moving some of your freight operations to east coast ports for delivery in the eastern United States.
Keep an eye out for additional fees, such as peak season accessorial charges.
With changing rates, it’s important to have a plan in place to help increase profits. Consider building a loyal carrier following through your 3PL or broker. Even if you don’t have enough volume to impact the overall direction of the market or to contract with asset carriers, you can build a reputation for your shipping location and the capacity that follows. Because of ELD’s and options, your shipping reputation directly impacts which carriers are willing to service your freight. For shippers of choice, carriers will return to haul your freight, in turn increasing the capacity of willing carriers to service your freight.
Aim for Shipper of Choice Status
- Load in the afternoon; receive in the morning: Because more trucks are available for loading in the early afternoon, you can increase the capacity able to service your account.
- Reduce delaying trucks: Whenever possible, eliminate or reduce delaying trucks. When you cannot, be sure to pay the carrier for any time over two hours spent at your facility.
- Provide advanced notice: Provide a forecast of shipments to your provider, even if you cannot tender loads until the pallets are built. There are more trucks available to be booked two or more days in advance of shipping date.
- Lower shipping weights: Keep your shipping weights below 42,500. New emissions regulations make it harder for trucks to carry heavy weights.
- Reward good service: Everyone likes to be rewarded for doing a good job! Be sure to reward good service, not just the lowest shipping rate.
Work With a Trusted Transportation Management Company
Work with a trusted resource to help you create a transportation management strategy for all modes of freight that can be executed during both flat and volatile environments. Look for a trusted transportation management company that offers:
- Transparent rates: Look for transparency of the rates being paid to the carrier. You need to know that your money is going to the carriers moving your freight — not to line the broker’s pocket.
- Transportation management uplift: 3PLs and brokers provided much-needed services. Look for upfront and agreed to transportation management uplift, instead of an unknown 3PL/broker margin. Pre-negotiating this fee ensures that you won’t be paying too much when rates are volatile.
- Mode agnostic solutions: Find the right solution for you — not one that fits in the box offered by the service provider.
- Guaranteed results: There are a lot of choices for 3PLs and transportation providers. Why not choose one that guarantees results?
- Streamlined services: You’re busy and don’t have time to bounce between websites to identify potential delivery delays or pull shipping documents. Look for a management provider that can provide shipment tracking and proactive alerting in one place.
- Shipment assurance: Provide another layer of protection to your operation by receiving a summary of the shipment plan that creates controls for each shipment.
- Reduce friction: COVID-19 has seemingly created more friction in getting even the most basic of tasks completed. Utilize tools that reduce friction by streamlining processes.
- Leveraged freight rates: Contrary to popular belief, more volume does not always translate to the lowest rates for “non-capacity restricted” modes such as LTL, ocean, and air. However, it can help. Partnering with a transportation management company that offers blanket rates can help you if you do not have enough volume to warrant your own contracts. If you move less than 20 shipments a month or have unpredictable destination locations, then leveraged freight platforms can save you both money and time.
We’re only halfway through our boxing match with 2020, and it’s not too late to come out on top. Take a page from Buster Douglas’ book. Commit to a plan, execute your plan, and persevere — even if you get hit in the mouth. To increase your odds of coming out on top, stack your corner with ShipTransportal. At ShipTransportal, we streamline the shipping process by putting all of your contracts, carriers, and shipments into one portal. Learn more about our services by giving us a call at (704) 892-0531.