From the COVID-19 pandemic, we learned that investments in technology are key. Having a first-class IT department that was able to transition 400 employees to remote working conditions within the first two weeks of the pandemic was a clear advantage. As business increased with heavier freight volumes over the last year, our investment in technology solutions has been an essential part of helping shippers be more efficient and cost-effective with their freight spend.
Shippers looking for trucking capacity should be aware that it will remain tight until the industry solves — or at least lessens — the driver shortage. Increasing driver pay only addresses one aspect of a much larger problem that continues to bedevil the industry. Drivers’ working conditions, their reputation and treatment, and the difficulties of life on the road also need review, as these considerations are often just as important to prospective drivers as fiscal compensation.
With this in mind, shippers should look to lock in contract rates whenever possible to allow for more efficient planning and scheduling, with a higher likelihood of securing capacity than gambling on the spot market. Communicate openly with brokers. Put all the chips on the table, and let them review underperforming lanes to help find better solutions to manage your network and maintain liquidity.
Over the past two years, the traditional bidding and contracting process has changed. Conventional contract pricing lost favor during the pandemic as mini-bid contracts of three months or more became the preferred option.
With the market changing so quickly, shippers are reluctant to make long-term commitments. COVID-19 created contract rates that were unsustainable. Transportation companies had to raise shippers’ rates to avoid losing their shirts. Many shippers were more inclined to transition their freight to the transactional market, resulting in a 20 percent year-over-year increase in transactional business.
This year, the US trucking market will be challenged by shortages of all kinds. Even if more trucks and equipment enter the market, there will not be enough drivers to fill those seats. There are shortages of chassis at the ports; shortages of labor in all sectors of the logistics industry, including warehousing labor, third-party logistics, rail yards, and ports; and shortages of available warehouse space to accommodate the massive influx of goods into the country.
Inflation and escalating costs present another major challenge. Carriers are facing exponentially higher insurance costs compared with only a few years ago. Costs related to drivers, maintenance, fuel, and new equipment have all skyrocketed. Shippers, meanwhile, are trying to mitigate escalating transportation rates while dealing with warehouse price hikes and a lack of capacity.