Pushed by a growing economy and driver shortage, increasing freight rates have been on most shippers' minds lately. In truth, rates, particularly in the truckload segment, have been on everyone's minds for quite a while now.
“June capped an unprecedented 15-month run of spot market rate increases, the longest sustained period of pricing power for truckers since deregulation [in 1980],” DAT Pricing Analyst Mark Montague told Transport Topics. “While contract rates typically rise after a sustained increase in spot market rates, there is usually a lag for four to six months. This year, that lag is reduced to a few weeks.”
While spot market rates may calm down for a period of time, the upcoming retail season may put the wheels in motion again. Even with threats of tariffs and trade wars looming overhead, the International Monetary Fund forecasts continued growth through the end of 2019.
Until a slowdown occurs or tens of thousands of qualified drivers appear, shippers may want to consider these tactics to help curb rising freight costs.
(1) DECONSOLIDATE FULL LOADS TO LTL
Shipping by less-than-truckload may not always be the best choice for everyone. But, if you're depending on a truckload carrier to provide multi-stop deliveries, LTL distribution may be an option worth looking into. This can be especially effective if the LTL carrier has a dense network to service multiple markets.
On the downside, the spillover effect of truckload capacity has also led to challenges in the LTL market.
“For all intents and purposes, LTL carrier networks are completely saturated and operating at full capacity,” said Mike Regan, chief relationship officer for TranzAct Technologies. “What does this mean? Well, in the words of one LTL carrier, it impacts its ability to respond to what it used to call the buffer issues. When there is a sudden spike in demand or a sudden change requiring extra trucks, they simply don’t have the capacity to provide those trucks to shippers.”
Shifting freight to the LTL sector may require some flexibility on both the shipper and carrier's behalf. Narrow delivery window requirements can strain your LTL carrier's ability to deliver on time. In conversations, try and find common grounds for delivery needs with regards to pickup and delivery times. If urgency is a priority, you may need to consider guaranteed delivery options.
(2) MODAL OPTIMIZATION
Expanding your modal strategy may open doors to cost-savings and extra freight capacity. Shipping by rail over long distances to destination markets, for example, can reduce the amount of time your freight spends on the road. With more availability of drivers to make local pickup and deliveries, intermodal services can go a long way in the right market.
In many cases, shipping expedited freight by air can be just as cost-effective as ground services. For the same reason as intermodal, there is less lead time involved for carriers to perform a pickup and delivery
(3) BUILD A LOCALIZED STRATEGY
Many shippers view a centralized supply chain as the most effective and efficient. While consolidating freight in one location may provide greater control over inventory, long haul distribution costs can have financial consequences.
If you serve multiple markets throughout the country, you may want to look into localized distribution concepts such as just-in-time warehousing and delivery. By positioning your freight in specific markets you may be able to reduce your long haul costs. Additionally, your customers can expect more reliable delivery service when their orders are nearby.
#ShipperProTip: Want to learn more about Just-In-Time solutions? Read our article about how positioning inventory in local markets can help you overcome lead time challenges. |
|---|
(4) USE A TRANSPORTATION MANAGEMENT SYSTEM
Finally, if you haven't already implemented one, consider adopting a transportation management system (TMS). This freight management tool can help you shop around for the best rates and service. By having access to quotes from multiple carriers in one place, you'll have more control over your shipping costs.
There are many TMS solutions on the market that can perform a variety of functions with varying prices. MyCarrierTMS, for example, is a free solution that gives shippers access to a number of carriers for quick quotes.
More advanced systems, such as Averitt Enterprise or ShipHawk, will give you even greater control over your supply chain. Advanced systems can incorporate inventory management and store shipping data permanently to show trends over time.
While these four strategies may not work for every shipper, they should be at least worth looking into. It may be a while before freight rates return to former levels. Leave no stone unturned.
