The 2:00 Minute Warning

The past couple of years have been extremely challenging for shippers who have watched their freight budgets go through the roof.

Let’s be blunt. Your truckload, LTL, parcel, air and ocean carriers have been asking for and getting – for the most part – significant increases in their rates to haul your freight. 

And that is why we continue to get asked a couple of questions from shippers who are trying to make sense of, and manage, what’s happening.

Here are a few of the questions we’ve heard come up often:

Why is this happening?

Basically, it’s all about supply and demand. And this is compounded by a couple of other very important facts. First, over the past two years the carriers in the truckload and LTL markets have experienced significant increases in their operating costs. Second, one of the (many) impacts of Covid is that it has slowed down the supply chain circulatory system so the carriers' assets aren’t turning as quickly as they used to be. This has strained the supply of equipment.

When you add it all up, with strong demand, limited supply, sharp increases in operating costs, and an even sharper focus on operating margins, the carriers have used their leverage to ask for and get very, very healthy rate increases.

Is it possible for shippers to mitigate the impact of these cost increases in this environment?

In answering this question there is great news and challenging news!

On the great news front, there are things that shippers can do to mitigate the impact of these increases, and even reduce their overall freight costs even when freight rates are going up.

As we learned from Shelley Simpson from J.B. Hunt and Geoff Muessig of Pitt Ohio, in this weeks outstanding “Navigating Your Supply Chain in Survival Mode” webinar, as shippers make their supply chains more efficient, they can lower the carriers' costs to serve their business. This can result in lower rates as the carriers share the benefits of lower costs with their customers.

Now for the challenging news! Making your supply chains more efficient will require a commitment to considering some necessary changes in practices and processes that make it more costly for your carriers to haul your freight. Why is this so challenging? Because some companies want to cling to the “this is the way we’ve always done business” mindset and don’t want to change the practices and processes that would make their supply chains more efficient.

How do you reduce freight costs internally?

Based on experience we have proven that companies who are willing to make changes and address the supply chain efficiency issue can reduce their freight costs. It may not be easy but we know that it is definitely worthwhile.

That is why during some of my recent presentations, I have asked audiences to “test” me by asking me what they could do to lower their freight costs. I am pleased to say I have “aced” these tests (BTW “acing” tests is a new experience for me) by sharing at least five things that shippers can do today that will help them lower their freight costs. And not one of these five things requires any negotiations with or approval from your carriers!

If you are interested in putting me to the test, get in touch and we will be happy to share at least five things for you to consider in lowering your company’s freight costs!  Even if you can not do all five of these things, perhaps a couple of them can make a big difference in helping you lower your freight costs.

How can you get started?

If you’re looking to bypass the “test” part and just want some ideas to support you in ways to improve your logistics operations and would like to get in touch with our team, reach out and we’ll ensure that someone from our team gets in touch with you in the next few days.

Another way to get started is to take advantage of the materials we have in our Resource Center, such as our eBook about building a transportation spend management plan.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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