Tips on How to Manage Freight Costs in this CODE RED Environment
Nov 18, 2020
If you’ve been thinking there’s a theme to these Two Minute Warnings for the last several weeks, you’re right! People hate unpleasant surprises! So we’ve been making sure shippers not just see, but understand how the unprecedented CODE RED conditions in the transportation markets could affect their freight budgets in 2021.
Why are we so passionate about this? Because we witnessed what happened in 2018 when most shippers had freight budgets that were blown to smithereens by the “Perfect Storm.” And when a good friend tells me (jokingly, I hope) that submitting bad freight budgets can be a “career limiting” strategy, we need to act. And we want to do everything in our power to help you manage your freight costs in this environment and make sure to the extent possible, that you have an accurate freight budget that addresses the impact of these CODE RED conditions.
That is why in October, we gathered a group of supply chain executives together for our first CODE RED webinar, CODE RED Freight Forecast with our friends from CSCMP and NASSTRAC. After receiving a ton of great feedback, several shippers requested a follow-up webinar focusing on solutions for shippers. As one shipper said: “The CODE RED conditions are serious, now give us some recommendations and steps we can take to control our spiraling freight costs!”
So yesterday we held that webinar with the same team, and once again the feedback has been tremendous. In fact, several people told us it was the best webinar of the year. If you didn’t have a chance to attend, we encourage you to download the recording now.
Our resources did a dynamite job of helping shippers understand the things that they can do to secure capacity at a reasonable cost and avoid supply chain disruptions.
A few highlights:
CODE RED conditions likely to continue through 2021 and potentially, into 2022 – Avery Vise from FTR shared some important financial and economic data that indicates that carriers will have the upper hand in their rate negotiations in 2021.
Understand that for carriers it is all about time and velocity – They’re looking at the total time to move your freight. LTL carriers are already taking advantage of this information and many truckload carriers are still in the process of collecting data that will be used to determine your rates in future years. Like Santa, they’ll be making a list and know if you’ve been bad or good!
Payment terms are reflected in rates – If your finance folks are pressing you to get your carriers to agree to terms of 60 days, 90 days, or more, let them know these payment terms will be reflected in your rates. And it will be more costly than having shorter payment terms.
Parcel shippers have options, but not many – In the face of overwhelming demand, there are still a few things you can do outside of working with the giants. And for those shippers who are struggling with restrictions from UPS or FedEx on the volume of packages they will handle, you really need to hear Jerry Hempstead’s recommendation on how to address this.
If you have questions or comments, we encourage you to get in touch.