Last month I had the opportunity to attend a great event that was hosted by the Council of Supply Chain Management Professionals (CSCMP) in New Orleans.
After one session, we broke out into groups and were asked an interesting question: What are some of the greatest threats to a company’s supply chain, logistics and transportation operations?
When the answers came back, we heard many concerns that you would expect to surface: labor recruitment and retention, the threat of disruptions, and challenges around supply chain resiliency.
After the discussion I raised my hand and said, "You’re talking about labor recruitment and retention, supply chain resiliency…and other important stuff…but you’re missing some things that could have a really significant impact on your supply chain and cause your freight costs to rise by as much as 25%- 30% over the next couple of years."
Afterwards, I noted that this doesn’t have to be your reality if you understand the critical issues on the table and make the appropriate plans to mitigate these increases. In response to their questions about the issues or threats that could cause carriers to raise rates in a big way in the near future, I pointed to three “BIG” things that shippers should be aware of and concerned about.
The first is the impact of nuclear verdicts being awarded by courts in judgements against trucking companies. For example, after Werner was deemed liable for an accident that was caused when a pickup truck veered across a median and into a lane of oncoming traffic and crashed in to the Werner truck, Werner was sued and ordered to pay $100 million. They appealed that verdict – and they still lost. Sadly, they are not the only carriers and 3PLs being hit with these nuclear verdicts that will result in much higher insurance rates, which will be passed along to shippers in increased rates.
The second threat is the impact of the independent contractor rules and the potential elimination of independent contractors. In California that’s known as AB5. Right now, the Biden Administration is looking at similar rules at a federal level. Every trucking association is against them because they know if these rules are adopted at the federal level, it will have a major impact on carrier cost structures and the availability of drivers in the trucking industry.
The third item is perhaps the most significant as it involves the electrification and clean air initiatives that the trucking industry is going to be asked to shoulder. Last week, the EPA released its regulations regarding its carbon emissions standards for the next several years. These new regulations as well as the push for electric trucks have been labeled “catastrophic” by trucking company executives, the ATA, TCA, OOIDA and anyone else that understands the trucking industry. Compliance could cost upwards of a trillion dollars for an industry that in its entirety is only $850 billion. More importantly it requires building millions of charging stations, running heavier trucks with less weight on trailers, and a massive loss of productivity as truckers have to spend time waiting on their trucks to be recharged.
What does this mean for you? Potentially much higher rates! And in my conversations with a couple of carrier CEOs, they shared a very important message, “Mike, if the economy picks up and these regulations are implemented, all bets are off – shippers will see their rates skyrocket by as much as 25% to 30% - or even more over the next couple of years!"
Fortunately, there are things you can do to protect yourself. We encourage you to talk to us about our supply chain Rapid Assessment and our LTL Strategic Assessment. We are experts in both developing risk mitigation strategies and realizing substantial and sustainable rate reductions while maintaining your service levels. Our process provides you with a roadmap to get the best possible results in uncertain times and a rapidly changing environment.
If you’re interested, give us a call at 630-833-0890, send me an email, or schedule a time to meet.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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