The 2:00 Minute Warning

For the past several months, I have received several calls and emails from C-Level executives, journalists and others who are looking for guidance and asking some common questions:

What’s causing the "Code Red" conditions in the freight marketplace?

How long will these conditions last?

Will freight rates continue to skyrocket?

Are there things shippers can do to manage and even reduce their freight costs in this environment?

With respect to the first three questions, the key issue is tight capacity in all transportation sectors (a.k.a. ocean, air, truckload, LTL, parcel, intermodal and rail). Capacity has been very tight for the past ten months and will likely remain tight well in to 2022. There are a combination of factors at work that have been causing and will likely continue to cause capacity to be very tight for the foreseeable future and result in challenges for shippers.

Overall, the carriers are doing a much better job of managing capacity selectively at a time when there is a tremendous amount of freight in the system. In some cases this is by design (especially in the ocean markets), but more often the carriers either don’t have enough equipment (trucks, trailers, containers, and chassis), and/or drivers to handle the volume of freight in their networks. Additionally, the pandemic is still having an impact on how quickly shippers are turning carrier equipment. Add it all up and in the ocean, truckload, LTL, parcel and any other market you can name, carriers are all facing constraints and issuing higher rates.

In this “sellers” market, savvy shippers are evaluating what changes need to be made in their sourcing events and carrier selection processes to address the carrier “fit” factor. Additionally, companies who are a “shipper of choice” will be able to get capacity at more competitive rates from their carriers.

With respect to the question about things that shippers can do to manage and reduce their freight costs, there is some good news. In our eBook, How to Build a Transportation Spend Management Plan, we highlight how shippers can change internal processes and practices to dramatically reduce their freight costs. Additionally, TranzAct’s Rapid Assessment is highly effective in helping companies identify which practices and processes can drive substantial savings and enable your company to operate more efficiently.

Finally, there is a reason that our recent Two Minute Warnings have continued to highlight TranzAct’s Carrier Yield Test. It has proven to be very effective in helping shippers see their business through their carriers eyes. Based on the all the positive feedback we have received, we are confident that it can in fact promote a healthy dialogue with your carriers' and proactively address issues that can help reduce your costs.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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