Supply chains have been stretched beyond their limits as shippers work hard to ensure inventories are received on time. However, this past year, carriers have struggled to provide the needed capacity due to unprecedented demand and rising costs in their networks.
In addition, chip shortages are causing delays in new trucks and trailers entering the market which is further exacerbating the situation.
As such, rates have increased due to demand outpacing capacity supply.
Much like the overall trucking market, truckload carriers have benefited from strong demand and high rates. However, the need for more drivers and trucks to address the strong demand has created such a tight market that shippers will likely not see any relief in terms of rates until the second half of 2022 at the earliest.
Trucking market research firm, FTR Transportation Intelligence, expects truckload rates to increase 2.5% to 3% throughout 2022, with year-over-year results potentially stabilizing later in the year.
“We’re seeing about double the volumes of freight moving in the spot market right now than we would pre-pandemic,” Dean Croke, principal analyst at DAT Solutions, said in a January interview. “So normally it’s a 90-10 split, 90% contract and 10% spot, and right now, it’s about 75-25.”
While the ball is in the carrier’s court regarding pricing, shippers can still benefit by establishing meaningful, collaborative relationships with truckload providers.
Regular, ongoing communication is essential to share feedback, improve processes, establish scorecard systems, and ensure execution, that is, the ability to obtain trucks when needed.
In addition, using online systems helps shippers with greater visibility in freight spend, rate compliance, and shipment tracking. This, in turn, will result in more open communication between shippers and carriers including the ability to turn bids around quicker as the market changes.
“Let’s work through this together,” Crocs Senior Director of Global Logistics & Supply Chain Network Design, Mary McNelly, recently told a TPM audience referring to the need to be a customer of choice in today’s volatile environment.
Indeed, negotiating agreements, including terms and conditions, that are fair to both carrier and shipper and providing rolling forecasts are important towards building solid relationships. Carriers rely on shipper forecast data to develop their plans for labor, equipment, terminals, etc.
But the key is long-term. In today’s freight environment, many shippers tend to look for the “quick fix” whenever there are market changes.
Instead, a long-term relationship can bring new opportunities to both shipper and carrier. The 25-year relationship between Wolverine Worldwide and Maersk, for example, has expanded beyond ocean container shipping services to include some drayage and trucking services. As Maersk expands its service offerings, Wolverine Worldwide is more open to studying further the possibilities of developing its relationship with Maersk.
This also holds true with truckload carriers and their trusted shippers as well. For example, the largest truckload carrier, Knight-Swift, is expanding its capabilities into the less-than-truckload (LTL) market to offer end-to-end trucking solutions to shippers. Trusted shippers will likely be among the first to embrace this additional capability.
Shippers can also establish strong relationships with flexible types of companies such as brokers or companies with a full suite of logistics products. These types of business provide not only truckload services but additional logistics services that can be tracked, monitored, and analyzed often via a single online platform.
At the end of the day, shippers still have a budget to manage. Those that have established, strong relationships with carriers and/or brokers will achieve not only long-term strategic goals but also short-term goals through regular, ongoing collaboration and communication with their carriers and/or brokers.
