The 2:00 Minute Warning

As noted in last week’s Two Minute Warning, we are living in an interconnected modal transportation world. I mention this because in talking with shippers who tell me that they don’t have to be concerned about the ocean market because they don’t have any ocean freight, I like to remind them: The ocean market affects every other transportation mode around the world! So, it is critical that they understand what is happening here because right now, the ocean market is a mess!

But there is more to this story. In some of my recent presentations, I have highlighted that there are some things on the horizon that could make 2022 even more challenging for shippers. So in response to the “What do we need to do to protect ourselves?" question, here is some advice that I've shared.

First, get educated.

As our friend and ocean expert Peter Tirschwell pointed out in our recent interview, “Why Ocean Market Mayhem Continues”, the impact of repeated Black Swan events means continued turbulence will affect the ocean markets and, potentially, other modes of transportation such as the trucking, intermodal, and air markets. With issues on the horizon in 2022, such as the looming contract negotiations at the West Coast Ports with the International Longshore & Warehouse Union, or the unresolved status of California’s AB 5 legislation affecting Independent Contractors, the need for shippers to get educated about what is happening and how it could affect your company is more important than ever before.

Second, understand your options.

If you still think the ocean capacity issues are going away anytime soon, think again. The port backlogs that have been happening around the country are likely to continue well into 2022, so it’s important to account for that in your timing of shipments and the selection of ports. When you look at the data, and see that just in the last week alone, there are 28 ships at anchor in the basin at the ports of L.A. and Long Beach, 11 at the Port of Houston, and 10 at the Port of New Jersey, you can appreciate that backlogs will continue and you will need to potentially adjust your sourcing strategies, consider different ports, and look at transloading options to get your freight moved.

Third, know what the carriers value.

Once those containers get unloaded from the ship, getting them moved inland in a timely manner can be a real challenge. That is why we encourage companies to know and act upon what it takes to be a “shipper of choice.” In our interviews with several carrier CEOs, they have confirmed that since carriers have the luxury of either accepting or refusing shipments or escalating rates to the extreme, shippers need to demonstrate that they can be effective stewards of the carrier’s assets.

These carrier CEOs have also affirmed that that they’re prioritizing and protecting those shippers with whom they have their long term relationships. Other common requests that you’ve probably heard are for as much advance notice as possible for shipments and prompt payment terms. To identify more ways to work well with your carriers, we encourage you to take advantage of our Carrier Yield Test worksheet if you haven’t already.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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