2019 will be a year for shippers to regroup and recover from the Perfect Storm of 2018.
2018 was a “sellers market” for carriers. Few shippers predicted the type of double-digit carrier rate increases that blew out freight budgets and resulted in significant unfavorable variances. In 2018, “freight barged into the boardroom” and commanded the attention of C-level executives who now have a keen interest in strategies to reduce their company’s freight costs.
Three primary factors that will affect freight costs in 2019 include market conditions, carrier constraints, and shipper issues and inefficiencies.
Regarding market conditions, the market will still favor carriers, but not to the extent it did in 2018. In a more balanced environment, carriers will actually have to negotiate and justify instead of just demanding rate increases.
With respect to carrier constraints, in a post-ELD and dimensionalizer (for LTL carriers) world, carriers now know how long a shipper is utilizing their assets, and the space consumed on the trailers. Armed with this time and space data, they will continue to favor capacity that provides a suitable return on investment.
Shippers who have accurate and reliable data, and who understand the impact of market conditions and carrier constraints, will lower their costs by taking advantage of sourcing strategies that are appropriate for this market. (Hint: Focus on targeted versus global requests for proposals.)
Finally, cleaning up from the storm will require shippers to undertake “shipper of choice” initiatives and address the inefficiencies within their company. As the CEO of a major truckload carrier noted, each company has at least 10 things they could immediately change to eliminate inefficiencies and lower freight costs by at least 5 percent. After the shock of 2018, C-level executives will be much more receptive in addressing these inefficiencies.