The 2:00 Minute Warning

Each year, one of our most popular Two Minute Warnings deals with issues and assumptions which should be considered as you build your freight budget for the upcoming year. Typically, we start getting calls for what we call the "Two Minute Budget Warning" in mid to late August and September.
 
This year, for whatever reason, we noted something unusual. The calls for our Two Minute Budget Warning started arriving in June and have continued throughout July. Based on the conversations we’ve been having, it seems like this early onslaught of calls is due to the high level of uncertainty about things that could affect their freight costs in 2025.
 
Given the high level of uncertainty, some of the recommendations in this year’s CSCMP Annual State of Logistics Report, which highlighted that uncertainty in the supply chain is here to stay, are more relevant than ever. First, be proactive and scan the horizon to see what’s coming your way. Second, once the issues are identified you can then ask: How will these issues affect my supply chain and freight costs? Third, use scenario planning to consider alternatives and options to protect your supply chain.
 
But the most important question to consider in preparing your budgets for 2025 is this: Are you a “status quo” shipper or a "strategic shipper"? A status quo shipper believes, “This is the way we do business; we’re not going to make a lot of changes. We want the lowest possible rates and are willing to tell the carriers to 'take it or leave it' when we make our final offer."
 
Contrarily, a strategic shipper believes in carrier partnerships so their approach is different. Strategic shippers believe that, “We’re willing to make changes if it’s beneficial for our carriers, gives us better rates, improves our service, and benefits our business.” Most shippers want to believe they are a strategic shipper - in truth, when push comes to shove, they are status quo shippers who will act tactically in their negotiations.
 
So, if you’re a status quo shipper, here’s what you should expect for 2025:

• Truckload - Anticipate a 8-10% increase in your truckload rates. That’s because the truckload sector will ultimately come out of the freight recession and carriers are going to be more aggressive in seeking rate increases.
• LTL - If you’re in the LTL sector, expect the rate increases to be somewhere between 5-7%. That’s less of an increase than truckload because the LTL carriers have been able to maintain higher base rates.
• Parcel - In the parcel sector, having reviewed the recently released rate increases from UPS for 2025, increases will likely fall in the range of 8-10% or more depending on how accessorial charges affect your budget.
• Ocean - Barring an unforeseen event, expect ocean rate increases to be in the range of 7-10% because of existing higher base rates and the conditions affecting capacity.

For strategic shippers there are better options! You can actually reduce your freight costs in 2025!
 
If you’re willing to make important changes and partner strategically with your carriers, you can enjoy lower rates because your carriers will have a lower "cost-to-serve" in managing your business.
 
The cost decreases could be as much as a 5-7% reduction in your freight costs. Since we are in the freight markets every day, we have been able to achieve those savings – and more after using our proprietary strategic sourcing model.
 
Let’s do the math. The difference in rates between being a “status quo” versus a strategic shipper that works with their carriers could be as much as a 15% difference in rates! That 15% could be a bunch of money! So for you status quo shippers out there: Are you willing to change and get that 15% or do you want to continue to throw that money out the door?
 
Overall, this strategic approach was endorsed multiple times in the recent CSCMP Annual State of Logistics Report. They placed significant emphasis on strategic planning versus simply reacting to conditions. They made frequent references to changing global, environmental, and economic conditions requiring a strategic plan with virtually a constant review by senior and operational management to react to rapid change.
 
For those of you status quo shippers who have now “seen the light", there is great news! TranzAct can help you transition to being a strategic shipper and unlock those savings for you. Over the years, we’ve built a great track record in helping shippers become strategic and partner with their carriers to achieve the optimum rates and conditions for both parties.

If you're interested in avoiding increases and learning how to be more strategic in your sourcing events, simply get in touch. One call or email can be a worth a ton of savings and profitability for you. We have the tools and evaluations that will give you important answers about changes that could result in immediate savings and benefits.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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