The 2:00 Minute Warning

The volatility we’re seeing in the freight market right now is simply unprecedented.

For example, before the pandemic the cost to move a container from Shanghai to the West Coast was around $2,000 - $3,000. Last year at this time, the cost of moving a container surged to between $20,000 - $30,000. Last week, a long time customer noted that at least for the next 90 days, he will be able to move containers in this lane between $4500 - $6000. He's thrilled and his company is happy that even though it's still substantially higher than what they paid prior to Covid, it’s a lot less than it was last year.

We are also seeing extreme volatility in the truckload markets as we track the variance between contract versus spot rates. Last year, spot rates were approximately $1.00 to $1.50 higher than contract rates. Today, in certain lanes, spot rates are anywhere from $0.75 to $1.25 lower on a year over year basis versus contract rates. While there has always been volatility in the truckload spot market, what we are seeing today has a lot of experts shaking their heads.

And that brings us the topic we addressed last week. Given the volatility, how do we prepare an accurate freight budget for 2023? Fortunately, based on experience, we know that there are things that shippers can do to use this volatility to their advantage. For example, we have seen carriers act very favorably to shippers who have a “strategic” versus “transactional” orientation and are willing to follow through on their commitment to being a “shipper of choice.”

We have a wealth of other information and tips as well on how you can make volatility be an asset versus a liability in working with your carriers. For example, our Capacity Service & Solutions (CSS) brokerage team has been doing a great job at giving shippers guidance in benchmarking selected lanes to determine where their TL rates are relative to the market. And our interview with Chris Caplice from MIT about "Strategic Sourcing" has some great insights for you.

Having said that, as you plan for 2023, we’re all hoping for a more “predictable” year. But we know there are questions to navigate. So if you’re looking for help or advice, we encourage you to get in touch with us.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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