We are now moving into the time when most domestic shippers are busy preparing for the coming year in full-truckload transportation. Variables such as global trade, GDP, the retail landscape, domestic trucking capacity and intermodal rates have industry analysts and economists forecasting an upcoming ‘bumpy ride.’ With the possibility of unstable markets ahead, here are a few suggestions to keep in mind as you manage your carrier portfolio.
Don’t Follow the Crowd (over the cliff)
The supply and demand equation in transportation is complicated and driven by many underlying variables. Use your experience and knowledge to monitor the key economic indicators. Test market conditions using spot rates and lane pricing solicitations; and, make your own assessment about the resiliency of your routing guide. Discuss among your team and amongst your customers and vendor carriers the issues that you face. Your instincts will often be right. Trust them.
Rebalance the Asset Mix ASAP
One of the risks in going deep on an asset-based carrier routing guide is that once market demand starts to improve, the carriers could come back to you for immediate rate relief or lock-out your ability to secure their capacity. Mixing the routing guide to include a larger portion of brokerage support keeps options on the table without sacrificing access to capacity and having a broader pool of carriers to compete for your business on price.
Keep your Intermodal Options Open
Although the Class I railroads have not effectively paced the falling rates within the OTR market during 2019, the significant declines in intermodal traffic, weak peak season and reverse conversions from IM back to OTR during the past year have them ready to deal on price and capacity going into 2020. Transit times and reliability are improving, so the first quarter is a great time to secure the most competitive intermodal pricing and capacity commitment for the year. Be sure to balance the mix to include asset and non-asset intermodal providers to mitigate any later-cycle price or capacity pressure.
Consider Spot AND Committed Capacity
What about using both? A good mix of committed (contracted) capacity along with a robust portion of spot (transactional) can go a great distance in meeting the ups and downs of your transportation needs during the year. Surge capacity in a committed space can get very expensive, however, supplementing with transactional capacity can help overcome this obstacle without disrupting any contractual commitments. It also enables you to keep a finger on the pulse of an evolving marketplace to make tactical adjustments to your routing guide mix to sustain balance and parity in the economics.
Leverage Diesel Fuel
The global petroleum production landscape has dramatically changed over the course of the last few years with the U.S. growing its energy production to meet the domestic consumption. This has helped create more stability within the on-highway diesel fuel pricing/surcharge space that will continue to help alleviate some of those ‘budget buster’ fuel surcharges/supplements that impacted planning during the last decade. Although the dawn of all-electric trucks appears to be not far away, at least for 2020 there appears to be adequate petroleum supply to keep the fuel markets calm.
Mitigate Liability & Risk
The transportation industry remains a magnet for litigation. The choices made by shippers in selecting qualified logistics providers to arrange for transportation of their freight has never been more important. Just having adequate insurance and operating authority is not enough. Be sure to select a broker/3PL/4PL that implements a safe and rigorous process for vetting carriers. Ask about processes and policies related to carrier vetting, load tracking and other logistics expertise to determine the steps taken to protect both the logistics provider and you as a customer. Finally, learn about the culture and values of your logistics provider to determine whether that organization is built and aligned to meet your transportation needs.
With preparation and foresight, your business can thrive during 2020. Making informed choices and following these 6 tips above will start your New Year off on the right foot.
The England Logistics Full Truckload division offers a range of services for companies of all sizes. Dedicated team members are available day and night to offer solutions and assistance with all logistical needs. Regardless of the transportation mode, our market and seasonal specialists provide flexible shipping solutions and are committed to helping every step of the way.