The 2:00 Minute Warning

In the fourth quarter of 2020, we hosted a series of important “Code Red” webinars with our friends from NASSTRAC and CSCMP, that highlighted how the conditions in the transportation marketplace would impact shippers. The webinars featured several senior level carrier executives and their predictions about what shippers would see happening in 2021.

In particular, they addressed how an improving economy and increase in GDP, coupled with tight capacity and other carrier challenges would make 2021 a year like no other. Some of their prescient predictions warned that carriers would be adjusting their networks, saying goodbye to customers and seeking aggressive rate increases. Well folks, whether you like it or not, as we head into the third and fourth quarters of 2021, their predictions have come true.

Perhaps the clearest signals of the tensions in the market have come from FedEx and UPS. A couple of weeks ago, FedEx issued their “peak season” surcharges that took effect June 21. For good measure, a couple weeks ago they also announced that they were in essence saying goodbye to about 1400 customers. While they have since reversed part of this move in response to pressure from their “Big Box” retailers, FedEx has clearly conveyed that in this “sellers” based market, they can be and will be selective about who they choose to do business with.

But FedEx wasn’t the only carrier sending a message to shippers. When UPS recently announced their new peak season surcharges that take effect July 4th as well as expanding the time period in which they'll issue a surcharge for higher than usual volumes this fall, it also sent another message that “you need us more than we need you.”

Together FedEx and UPS have let shippers know that they’re focusing on the most profitable freight now. If it impacts customer loyalty in the long term, they will deal with those issues in the future. FedEx and UPS are outstanding carriers, but they are not the only carriers who have a laser like focus on customer profitability. So I wasn’t terribly shocked when one senior level carrier executive explained the “new normal” in transportation to me: “We have trucks, shippers need trucks, so we get to charge what we want for our trucks!”

If you’re wondering how to respond in the current market of tight capacity in every mode, here are three messages you need to understand.

First, make sure you understand and are aware about how the volume of freight in your carrier networks are impacting their ability to serve your business. Every carrier we’ve talked to has shared that they have more freight than they can handle and are continually looking for ways to rebalance their network. This can also be seen visually on a recent Outbound Tender Volume index from FreightWaves that shows volumes rising rapidly in March and then hitting a new plateau of high demand.

Second, face the reality that with too much freight in their systems, the carriers can be highly selective about who they do business with. It’s definitely a seller’s market. Even with rejections decreasing, rates have managed to rise since shippers need to move their freight and can not risk jeopardizing their capacity. So being a “shipper of choice” isn’t just a good idea – it should be a requirement!

Third, it’s imperative that you understand how the carriers view your business. After we shared our Carrier Yield Test worksheet last week, there was such high demand that we’re sharing it once again. We’ve heard great feedback about how this tool facilitates a dialogue with carriers about how they see your business.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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