Shippers, It’s Time to Seize the Moment and Take Control of  Your Rates

Shippers, It’s Time to Seize the Moment and Take Control of  Your Rates

The transportation and logistics industry ecosystem continues to adapt and innovate as conditions shift. In the past couple years, shippers have had to contend with increased direct rates and exposure to the spot market, as well as supply chain disruption caused by macroeconomic conditions such as the Covid-19 pandemic. Now, there’s finally a window of opportunity to optimize their operations, ensure costs are inline with the market, and prepare for the next business cycle.

Q. What do shippers need to know about current conditions and how we got here?

A. In peak years with tighter capacity and an increasingly fragmented and competitive supplier base of carriers, we’ve seen inflation for shippers increase by 6% in 2015 and 12% in 2018. Recent macroeconomic events steadily drove shipper truckload rates to new heights as inflation increased 23% in 2021.

The tides turned for shippers as markets started softening in early 2022 as capacity loosened and eventually turned into a surplus. By April 2022 the market inverted, with spot rates dropping below contract rates, pushing shippers to get creative and shift their procurement strategies again.

Q. Where do you anticipate the market heading and what new trends will have a lasting impact on shipper strategy?

A. We anticipate that rates will continue to drop or remain at lower levels in 2023. One of the key bid rollout periods occurs in the spring season, and we’re starting to see these new replacement rates starting to enter our data and driving further cost reductions for shippers. During this time, shippers shouldn’t expect to entirely recoup losses they endured, but there is a sizable opportunity for shippers to shift their approach from cost containment to cost reduction.

In the most recent Signal Report from DAT iQ, our team of experts provided the following guidance:

“Shippers should continue to take advantage of the inverted market to secure lower contract rates, but also to shift more loads away from the routing guide (after meeting carrier commitments) to leverage the spot market. We believe that the trend of using a mix of contract and strategic spot rates will continue beyond the current soft market.”

With more capacity available, shippers have regained greater leverage in negotiations—for now. Keep in mind shippers would be well-advised to build and maintain strong, cooperative partnerships with carriers regardless of market conditions.

Mid to large shippers in the U.S. generally ship over 80% of their freight under contract, avoiding the spot market if possible. In that context, the improved perception and increased strategic usage of the spot market, especially on low volume live load lanes, has certainly been one of the most significant recent trends.

The transportation and logistics industry is constantly changing, and shippers must be proactive in anticipating and adapting to new trends and market conditions to stay ahead of the competition. By leveraging accurate rate and capacity data, shippers can drive fair negotiations with carriers, find new cost savings opportunities, remain competitive, and navigate this complex landscape and come out ahead in the long run.

Chad Kennedy is group product manager for DAT iQ and responsible for delivering benchmark reporting solutions to customers. Prior to joining DAT in 2018, he led the transportation department for CHEP, where he was a customer of DAT for nine years. At CHEP, Kennedy leveraged data analytics and his prior experience as a manager with a small trucking company to partner with carriers and brokers to improve cost and service.

With more than 15 years of experience in transportation and data analytics, Kennedy has now focused his efforts on solving analytical and benchmarking problems for shippers, carriers, and brokers.