Here's a quick question for you. “When is the best time to prepare for a storm?” The obvious answer is that the best time to prepare is before the storm hits. Ideally, you would think that after what shippers experienced during the supply chain storm of 2021, they would take the threat of a future supply chain storm a bit more seriously.
Candidly, the evidence suggests that some shippers are ignoring some ominous signs that could portend yet another supply chain storm. Are you one of those shippers that could be blindsided by activities in the transportation marketplace and see your freight costs go up by as much as 15 to 20% this year?
If so, can we talk? There are some things that you may want to start paying attention to because, as recent articles in various periodicals have highlighted, there are supply chain storm clouds gathering on the horizon.
For example, last week the Wall Street Journal highlighted that shippers are seeing container rates rise by as much as 30-40% in recent weeks. Yesterday, a good friend of ours who is a freight forwarder, told us that late last week, his main ocean carrier imposed a $1000/container surcharge and told him to expect another significant increase in surcharges within a month. In short, as the WSJ and Journal of Commerce have noted, shippers are probably not done seeing increases.
Will we see rates skyrocket to 25k, 30k or more like we did during the pandemic? We don’t think there’s enough momentum for that to happen, but it can’t be ruled out either because we have all seen the reality that things can change in a moment. Is your company doing any scenario planning that addresses this rapid escalation in costs or the impact that extended transit times are having on your inventory or balance sheet issues?
Over in the truckload market, as we have noted in recent Two Minute Warnings, truckload carriers continue to experience the longest and most severe freight recession in modern times. We are now in the 28th month of this recession but we are seeing signs that truckload rates are starting to rise.
There are a couple reasons for this: One, we’re seeing capacity shrink a bit as carriers leave the market. Two, large truckload carriers are basically parking rigs or allocating them to the spot market until they can sign contracts with acceptable rate levels. In short, these two factors are in fact reducing capacity in the truckload sector.
Having been in this market for a long time, we've witnessed various boom or bust cycles. But as my friend Jeff Tucker from Tucker Company has noted, what we have now seen over the past 10 years is a compression of cycles. Instead of the freight market modulating between highs and lows over a four to six year cycle, we are now seeing a cycle compressed into two to four years. This has significant implications for shippers as they budget for their freight and supply chain related areas.
How do you prepare for faster changes in the market? Or, more importantly, is your company prepared for the next supply chain storm? If you could use some help preparing for future supply chain storms, TranzAct can be a great resource for you.
With our supply chain rapid assessment as well as our targeted truckload and LTL assessments, we'll share alternatives and options that could protect your supply chain, lower your costs and increase your profitability. The reason these assessments have been so popular is because they can be transformational in moving companies away from a transactional mindset to a strategic orientation, which can create a supply chain that is a competitive advantage for your company.
To get in touch, simply give me a call at 630-530-6190, send me an email, or schedule a meeting with me.
Another way to prepare for what's ahead is to take a look at our latest Freight Market Update to get a better understanding of what’s happening in the economy and by mode.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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