Is It Time to Revise Your 2021 Freight Budget?

Nov 11, 2020

If there is one thing shippers should have learned from the lessons of 2018 it's this: C-Level executives hate unpleasant surprises—especially when it comes to freight budgets that get blown out of the water. It also doesn't help when your budget fails to address important freight issues that could potentially disrupt your supply chains. It's bad for your company and even worse for your career!

We bring this up because we are concerned about history repeating itself. We're anticipating that some shippers will submit freight budgets for 2021 that will once again get blown out of the water...unless they understand and build a budget that reflects this CODE RED transportation environment.

Fortunately, your friends here at TranzAct, CSCMP and NASSTRAC are going to do everything we can to help you prepare an accurate budget by making sure you understand the transportation marketplace challenges we're facing. Specifically, we invite you to join us on November 17 at 11am CST for Part II of our CSCMP / NASSTRAC / TRANZACT CODE RED webinar series: CODE RED Solutions for Shippers.

I know you are extremely busy, but we're bringing back our outstanding panel from Part I of the webinar series to share practical solutions for managing freight costs and issues in this environment.

Here is why you need to join us...

After our first CODE RED webinar, I received a call from a distraught shipper who told me his budget forecasted a 4% increase in truckload rates. After hearing US Xpress CEO Eric Fuller talk about how driver wages increasing by as much as 20% could cause truckload rates to go up by as much as 10% to 14%, this shipper told me: "I need to revise my budget."

I concurred because more and more truckload carriers will be significantly increasing driver wages. Last week it was announced that Heartland Express will be issuing variable increases to driver pay based on experience that amount to as much as 12%. Schneider National drivers will see a pay increase of up to $6,240 a year and this will push annual pay for many Schneider drivers above $90,000.

With driver wages making up about a third of a carrier’s operating costs, rates will have to go up by 5% to 7% just to cover those increases—and that's just for starters. We’re also seeing costs of insurance rise in the wake of nuclear verdicts, and general operating costs increase as pandemic conditions continue to present disruptions and delays.

If you need more reasons to reexamine or revise your 2021 freight budget, consider that in this CODE RED environment, all sectors in the transportation marketplace are running full throttle.

In the LTL sector, the carriers have extensive data and they are using that data to make sure they are being compensated for the space used on their trailers. Whether it's General Rate Increases (GRIs), the use of surcharges, or charging higher rates for minimum charge and/or non-traditional shipments, it's important that your budget reflect the potential increases in LTL freight.

And while we wish we had better news when it comes to addressing potential increases in the parcel, ocean, and intermodal sectors, the facts are pretty clear: Your freight budget had better address the potential for significant increases in these sectors as well. In short, with carriers being more selective about what they want to move and where they want to go, they will use pricing to achieve their objectives.

And that is why you need to clear your schedule for Part II of our CODE RED webinar series, CODE RED Solutions for Shippers on Tuesday November 17 at 11am CST. Once again we're hosting this webinar with our friends from CSCMP and NASSTRAC. We’ll be covering solutions that can benefit shippers, so sign up to hear what our panel has to share.

"See" you next Tuesday!