The 2:00 Minute Warning

Last week we talked about how the freight recession is impacting supply chains. We heard from viewers who liked what they read but they asked us to be a bit more granular. Specifically, they were asking for more information about how a freight recession could affect their rates with carriers.

Based on some sourcing events that we have recently completed for customers, the answer is A LOT! As in there are a lot of potential savings in the truckload and ocean areas for shippers who use the right sourcing strategies to work with (as opposed to beat up) their carriers. The story is a bit different on the LTL front.

But just to confirm what we were seeing with how the market is behaving, we went to our friend, Scott Group from Wolfe Research and interviewed him about what’s going on in the transportation market, what it means for shippers overall, and what it means for freight rates. Scott provided valuable insights about what’s happening in the modal sectors such as ocean, railroad, truckload, LTL and air.

Let’s cut right to the chase. For those of you who have responsibility for managing the logistics and supply chain activity within your companies, or for Presidents and CEOs who are interested in understanding what’s happening with the economy, this is an extremely interesting and “must watch” interview.

In case there’s any doubt, Scott clarified that yes, we are indeed in a freight recession. A lot of this is caused by the “Bullwhip Effect” and other inventory issues as companies who went from a “Just In Time” to “Just In Case” inventory plan now have to cut back and work off the excess inventory.

In the interview he also shared that there is a window of savings opportunities. BUT shippers who want to get those savings need to act quickly since the market is very volatile and there is no telling how long this window will stay open.

For example, since the ocean carriers believe that the container rates will rebound, they are looking at short term contracts. And some truckload carriers have indicated that in their current contract negotiation, they are offering lower rates to replace volume lost due to the freight recession. But, as they stabilize their networks, they will be looking to get higher rates in contracts negotiated later in the year.

If you’re interested in getting this interview, send me an email. We will send you the interview and make sure Scott has your information so you can participate in their quarterly Shipper Survey and receive their valuable research information.

If you are considering launching a sourcing event and want some outstanding insights, we strongly recommend that you listen to our webcast from last November. In the webcast Dr. Chris Caplice from MIT talked about the kind of sourcing strategies you want to use to maximize savings opportunities.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
CONNECT ON LINKEDIN