BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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News Alert! C-Level executives don’t like unpleasant surprises!
That’s why a Two Minute Warning earlier this year asked whether your freight budgets addressed the impact of “Code Red” conditions in the transportation marketplace. Truthfully, for whatever reason, we sense that this advice may have fallen on deaf ears.
But, no more! In the past month, several C-Level executives have called and asked: “What the heck is going on in the freight markets?” In response, I encourage them to read and share our recently released Freight Market Update with their teams. Then I suggest they ask their team to review their freight budgets.
Coincidentally, several transportation and logistics professionals have told us that even though 2021 is only two months old, their freight budgets are not looking too good. As one dear friend told me: “Mike, I am going to have to either revise my freight budget or revise my resume!”
The reasons why he and every other shipper should be concerned is because we are seeing things in the transportation markets that are literally unprecedented. Pick a mode and there is no excess or surge capacity. Couple this with the impact of COVID related conditions and you have very, very challenging conditions for shippers. How challenging?
Last week, I was part of a panel discussion at the Journal of Commerce’s outstanding TPM Conference. The TPM Conference is one of the most in-depth conferences focusing primarily on international shipping, but this year the conference was expanded to address multi–modal conditions in the North American marketplace.
Talk about drinking from a fire hose. The outstanding content helped explain why shippers are likely to experience difficult conditions for several months, if not the entire year. And these conditions will likely drive up your company’s freight costs.
While the theme was “Redefining the future” and addressed many of the challenges we reported in our Freight Market Update, many of the speakers talked about the issues in the market right now. For example, I had the chance to participate in a panel discussion called “Trucking 2021: What Will the Market Look Like?”
Tom Schmitt of Forward Air talked about how they’ve been asking for a GRI of 6% and not getting a lot of push back since shippers are just happy to get trucks. Greg Orr from CFI brought up how they received over 6 billion dollars of bids in 2020 and could be very selective about the ones they chose. And on the shipper side, Holly Pearce of Agway talked about how these issues are affecting her company.
The FreightWaves Global Supply Chain Week, which overlapped with the TPM, also had great perspectives on ocean shipping. In one session, Stephanie Loomis, a VP at Vanguard Logistics Services, stressed the importance of providing accurate forecasts in their contract negotiations: “The best forecasters will get the best deal!” Other speakers at the conference stressed that high rates and a high level of uncertainty with shipping timelines aren’t going away anytime soon.
If you need any more reason to revise your freight budgets, diesel prices are up over thirty cents since January 1, 2021 and are predicted to go higher. This means that shippers are likely to see a 3% to 5% increase in their fuel surcharges in 2021. Thus far, very few shippers that I have talked to included fuel surcharge increases of this magnitude in their budgets, which is why we are recommending shippers look at their 2021 freight budgets to make sure it reflects the types of costs they will experience.
Of course, if you have any questions or issues, give us a call or send us an email. We’ll continue to monitor the impact of the new stimulus, vaccine rollouts, and inventory restocking issues for shippers in the weeks and months to come.