It is hard to believe that a decade has gone by since the Great Recession. Those of us in the Freight Transportation Industry at that time remember the sharp drop in business activity and freight volumes. This encouraged many shippers to conduct multiple freight bids during that period to use (abuse) their freight rate negotiating leverage to reduce their shipping costs. Carrier loyalty was sacrificed for freight cost savings.

One year ago, the tables were totally reversed. The introduction of electronic logging devices (ELDs) combined with an upswing in economic activity and a capacity shortage pushed freight rates to record levels. Carriers became very selective in allocating their capacity. Manufacturers and distributors were advised to become “Shippers of Choice.”

Carriers gave preference to shippers whose facilities were “driver friendly,” whose loads and paperwork were ready in a timely manner, who moved loads to preferred locations, and who paid top dollar. Shippers that wished to maintain consistent, reliable capacity and service were encouraged to establish “core carrier” programs at “carrier friendly” rates. They were told to pay the newly elevated rates to protect their supply chains.

Carrier costing models have evolved over the past couple of decades. Freight rates are based on the complete set of transportation-related processes at origin, in transit, and at destination, to serve each client. To effectively manage freight expenses, shippers must have a full understanding of all three elements.

Shippers with weak shipping order procedures and staging processes drive up the cost of freight transportation. Shipments that move at peak times, in congested areas, to remote areas, or on circuitous routes, drive up the cost of freight transportation. Consignees that disrupt or slow down the delivery process, that consistently extend a delivery beyond standard Hours of Service, that charge fines for late deliveries, have a significant negative impact on the financials of the shipper. What takes place during the pick-up and loading process is only part of the expense of moving freight in a cost-effective way. One of the biggest mistakes a shipper can make is to think that after they have selected high quality carriers, negotiated competitive freight rates, and trained their carriers on how to load their freight, their job is done. It isn’t.

The world of freight has changed. Hours of Service regulations coupled with the ELD implementation have increased the focus on driving and delivery windows. Strong economic conditions have created capacity shortages. Driver shortages have made capacity even tighter as carriers have had to park equipment across North America. Shippers and consignees with ineffective pick-up and delivery processes can increase the number of transit days beyond previous norms and raise costs. Shippers with chronically inefficient processes have been facing not only higher rates, but also a shortage of capacity. This can jeopardize customer retention, revenues and profits. What can shippers do to prevent this from happening?

Gain an Understanding of the Three Components of Freight Transportation for your Business

 Global Economic Outlook

Early this month, the International Monetary Fund downgraded its outlook for growth in the United States, Europe, Japan and the overall global economy and pointed to heightened trade tensions as a key reason. U.S. trade talks with China continue without resolution, and there are indications that the rate of Chinese economic growth is slowing. The IMF expects the world economy to grow 3.3% this year, down from 3.6% in 2018. That would match 2016 for the weakest year since 2009. In its previous forecast in January, the IMF had predicted that international growth would reach 3.5% this year.

U.S. Economic Outlook

Economists expect U.S. first-quarter growth to decelerate less than previously thought even as they cut forecasts for the rest of the year, projecting a second-quarter rebound will fade as the effects of tax cuts wane. The median estimate for growth in the first three months of the year increased to 1.6% from 1.5% seen last month, according to an April 5-10 Bloomberg News survey. At the same time, forecasts for the second quarter held at 2.6% while those for the third edged down to 2.2% and were lower for the fourth, at 2%.

In February 2019, the American Trucking Research Institute completed an excellent study entitled, E-Commerce Impacts on the Trucking Industry. This blog contains a summary of the highlights of this report. For more information on this topic, download the full report which contains an array of sources that are footnoted throughout the document.

E-commerce has been defined as retail and business transactions involving the use of online platforms. Closely aligned with E-commerce is omni-channel retailing, which represents a real-time, channel-agnostic synchronized visibility of inventory across the supply chain using a central stock pool, that allows consumers to fulfil demand anytime, anywhere. These developments have disrupted current business models in the retail industry. Technological innovations associated with these developments have significantly changed the consumer experience; manufacturers, distributors, retailers and transportation companies have adapted their supply chains and business models to support the new retail environment.

This blog is comprised of two components.

The first segment examines changes that pertain to retail supply chains. This is followed by a look the direct impacts of these changes on freight transportation.

The Changing Retail Landscape

The following is my annual report on the state of the LTL Freight Industry in the United States and Canada.

The Booming Freight Market of 2018

Strong economic growth and high employment in the United States and Canada, coupled with concerns over US tariffs and trade wars, and high truck utilization rates, propelled freight demand and freight rate pricing skyward. Contract and spot LTL rates rose to record levels. These powerful forces helped make 2018 an outstanding year for many, but not all LTL truckers.

How Big is the LTL Market?