2021 Freight Budget
Jul 29, 2020
If you have responsibility for preparing freight budgets in 2021, good luck! You’ll need it.
We’ve been getting lots of calls with questions about what to plan for the year ahead as shippers around the country prepare their budgets. In this week’s Two Minute Warning we’re responding to questions about truckload rates in 2021 based on numerous conversations with C-Level executives from various trucking companies.
There are a couple of important assumptions that will impact your truckload rates. First, economic conditions will have a significant impact on capacity issues and truckload rates. That is why it is important that your transportation budget reflect your company’s expectations about the economy and align with the rate increases you’re predicting. If your company is expecting significant rebound, plan for truckload rates to increase by 5-8%. If your company expects a more moderate economic rebound, plan for 3-5%, and if your forecast predicts a flat economy, then increases of 0-3% would make sense. And if you think the economy will be getting worse, it is quite possible that your truckload rates could go lower - which is exactly what we saw happen this past March and April.
The second factor you need to address in your budget is how your company will perform in 2021. More so than ever before, we are seeing truckload carriers look at how they are managing their capacity. Consequently, they are paying close attention to the volumes specified in your RFP. If there is a significant difference between the volumes quoted in your RFP, this could impact your truckload rates.
Finally, your budget should reflect when the increases or changes will occur during the year. Typically, this would reflect your contract cycle. For example, if your contract with a carrier expires March 31 and the rates increase by 6%, the impact of that increase for 2021 would be 4.5%.
In next week’s Two Minute Warning, we will address how blank sailings are affecting ocean capacity and rates. After that we will address the LTL sector. We'll also address questions such as, will air cargo rates rise with the onset of the holidays? So stay tuned as we will be watching and providing updates to assist in the budgeting process.
In the meantime we have received some great feedback from folks about two resources you can use to start off your 2021 budget process. These are our Transportation Spend Management Plan eBook and our Rapid Discovery Assessment. A Rapid Discovery Assessment is a chance for you and your team to get insights and proactively address how to improve the performance of your operations. During this “roll-up-your-sleeves” session, you’ll discuss your supply chain strategies, challenges, opportunities, and corporate strategy, and learn how companies with similar business characteristics are tackling the issues you face.