Carrier Controlled Marketplace: It’s a carriers’ world (for now)! We are all just shipping in it.
Posted on May 19, 2022
Written by Brooks Elliott
It seems like just yesterday when trucking rates were predictable, normalized and shippers didn’t have to pay close attention to the smaller cost items like fuel surcharge. Fast forward to today; shippers are faced with pricing volatility, continued disruption in their supply chain and rising costs of goods sold looming around every corner and the carriers are basking in it.
Since February 2020, the American economy and its consumers have been dealt the worst health crisis in modern American history. The black swan event we now know as the pandemic coupled by an already crippled energy market set the stage for a launching point for those carriers ready to move shippers’ goods both essential and non-essential. The already tight trucking market fueled by driver shortages and rising operating costs like insurance, maintenance costs on equipment, government regulations and in cab technology laid the groundwork for carriers to capitalize on healthier rates. Not to mention some of the large fleets also took advantage by upping their driver pay to secure best in class drivers and curtail driver turnover. Large private fleets like Wal-Mart are now paying their drivers over six-figure salaries. In a recent Freight Waves publication, it was estimated that operating expenses for nearly all carriers have surged by as much as $0.38 per mile over pre-COVID levels.
As that leverage pendulum began to swing away from shippers over to the carriers, what are shippers and their traffic departments able to do to prepare or stay protected? Here are some top-of-mind solutions if you are a shipper looking for answers:
- We live in the real time, data driven decision making marketplace. Are you diving into the numbers and paying close attention to indexes that track freight market trends? It is not only important to pay close attention to your own data in your Transportation Management System (TMS) but what other sources might be publishing.
- Align yourself with carrier partnerships beyond the one and done transactional relationships. It seems like common sense to do business in the spot market these days to ensure capacity but spending a little extra time finding the carriers with assets that desire to have your freight long term always drives prices down to a certain level.
- Validate or benchmark your rates. Look for ways to optimize your carrier rates with third party advisors who stand by their benchmarks and know how to negotiate on your behalf because they used to work for the carriers on the other side of the negotiating table. This will keep your contracts active and fresh helping offset General Rate Increases (GRI’s) or accessorial charges that can quickly add up on a freight invoice.
- Think upstream and get a handle on your inbound freight. Don’t turn your back on your supplier networks considering what that might do to your outbound when you don’t have control. Pay close attention to who is shipping to you on prepay and add terms or third-party shipping contracts so these lack of control items don’t send a ripple through your supply chains, driving inflated cost of goods sold and even worse create a warehouse to run out of inventory or plant shut down.
- Think outside the box and pay attention to what carriers offer what tools or mechanisms that can save you money on your freight. Which carriers offer dynamic pricing or LTL spot quotes? Which carriers may offer open APIs to integrate into your TMS or electronic bill of lading software to drive efficient quoting, routing and tendering? Using the right automation tools that can generate more soft dollar savings is often overlooked but once implemented into the organization can impact the bottom line quick.
As we enter the summer months of heavier shipping volumes expect more of the same with supply chain bottle necks, starts and stops, macro inflation, higher fuel costs, tightening of capacity…. the list keeps getting longer. Couple these events with seasonal spikes in demand, the outlook pretty much looks the same, expensive. No one knows how far up the carrier rates will go or where that ceiling exists but for shippers it isn’t too late to take advantage of some of the tools that can help ease the pain and keep that pendulum swinging a little closer. Until that time comes its more important than ever to seek out all points of leverage against the overwhelming advantage the carriers currently enjoy.