5 Ways to Mitigate High Freight Rates
Consistent economic growth in industries dependent on logistics has increased freight demand, creating more loads than available trucks. Spot market rates are up 25 to 35 percent over 2017, and analysts expect tight capacity and higher costs to continue into 2019.
The main factors impacting the current freight market during this historic time include:
Driver shortage. To attract new drivers, trucking companies offer signing bonuses and higher wages, ultimately increasing shipping costs.
ELD mandate. Experts report the electronic logging device (ELD) mandate has cut productivity and impacted transit times. A lane that once traveled in one day now takes two, with inherent rate increases.
Carrier confidence. Rates were already overdue for an adjustment in 2017. Heightened by hurricanes, the ELD mandate, and a produce season that dramatically impacted capacity, carriers were able to increase rates based on the high-demand market.
Increasing fuel costs. Fuel costs are currently up 25-30 percent from one year ago, and at their highest level in more than three years.
B2B buying behavior. B2B buyers mirror consumer purchasing behaviors and delivery expectations,resulting in more frequent shipments of lightweight and bulky items that cube-out trailers and leave less room for heavier, stackable items. To contend, carriers are adjusting rates based on how much trailer space a shipment occupies.
How to Offset Higher Rates
- Leverage a full suite of multimodal solutions. Treat each shipment as a move, independent of the modes and vendors required to transport. A load that previously shipped via truckload in three days could now take four days with ELDs, so combining rail with truckload and LTL could be more efficient and cost-effective.
- Become a shipper of choice. In today’s market conditions, shippers are competing to book an available truck at a reasonable rate. To attract carriers and save on shipping costs, adopt a “shipper of choice” mentality. Run efficient and friendly dock operations, reduce driver wait times, provide comfortable breakroom and restroom accommodations, and pay carriers quickly and accurately.
- Leverage technology. Adopt a transportation management system (TMS) that drives operational efficiency and competitive advantages within your supply chain. The TMS should include capabilities such as AI and machine learning to automate processes, integration tools that connect your supply chain and provide full visibility, predictive analytics tools to manage disruptions and make data-driven decisions, and fully supportive mobile environments.Expose your technology to all constituents in your logistics workflow to automate, manage, and control mission-critical business processes.
- Centralize transportation procurement. Integrated managed solutions that connect the people, processes, and technology involved in your supply chain drive increased visibility, operational efficiency, and continuous improvement. Utilize strategic sourcing opportunities to connect your freight and lanes with core carriers.
- Partner with logistics and supply chain experts. Third-party logistics firms offer access to deep carrier networks with reliable capacity, multimodal solutions, and technology that helps mitigate freight market fluctuations and meet customer delivery demand.