<div class="phx-topic abstract-wrapper">The cooling of trucking’s transactional spot market signals a “realignment,” not a contraction, as shippers cement contractual agreements and freight demand rises, albeit more slowly.</div>

The cooling of trucking’s transactional spot market signals a “realignment,” not a contraction, as shippers cement contractual agreements and freight demand rises, albeit more slowly.

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<div>US shippers desperate to regain pricing power and reduce trucking costs after two years with motor carriers firmly in the driver’s seat can finally see some light on the horizon, thanks to a sharp correction in truckload spot rates that saw linehaul rates on DAT Freight &amp; Analytics load boards tumble more than $0.44 per mile from March to May. But thus far, that relief has been mostly limited to the short-term spot market. Overall US trucking costs remain well above pre-pandemic levels, buoyed by contract rates that have risen by double-digit percentages in each of the past two years,...

US shippers desperate to regain pricing power and reduce trucking costs after two years with motor carriers firmly in the driver’s seat can finally see some light on the horizon, thanks to a sharp correction in truckload spot rates that saw linehaul rates on DAT Freight & Analytics load boards tumble more than $0.44 per mile from March to May. But thus far, that relief has been mostly limited to the short-term spot market. Overall US trucking costs remain well above pre-pandemic levels, buoyed by contract rates that have risen by double-digit percentages in each of the past two years, rising fuel prices , and resilient freight demand. The producer price indexes (PPI) for long-distance truckload and less-than-truckload (LTL) pricing from the US Bureau of Labor Statistics (BLS) show the impact of higher contract rates and surcharges. The BLS long-haul truckload PPI rose 5.1 percent in April from March and was up 7 percent from February. The LTL PPI rose 5.2 percent in April from March and 14.2 percent from February. Year over year, the LTL PPI rose 23.9 percent in April, while the truckload PPI was up 39.6 percent. Fuel surcharges likely account for a significant portion of the annualized increase, on top of contract price hikes. Freight demand is growing, not contracting as would happen in a “freight recession,” as consumers continue to spend, US factories increase production, and imports pile up at US ports and inland railyards. And that could put more upward pressure on trucking rates as 2022 unfolds. US Federal Reserve Board data show total industrial production rose 1.1 percent in April, and manufacturing output was up 0.8 percent. US retail sales were up 0.9 percent in April and 1.4 percent in March, according to the US Census Bureau. “We’re not seeing a freight recession, we’re seeing a realignment of how freight is moving,” Satish Jindel, president of transportation research firm SJ Consulting Group, told JOC.com in early June. “The COVID-19 pandemic and recession were not like the 2008–09 recession, when things went back to normal after a few years. Longer-term impacts of the pandemic are going to play out in 2022, 2023, 2024.” After two years of disruption caused by the pandemic-induced surge in US consumer imports, logistics managers are recalibrating their networks and their relationships with carriers and brokers. By shifting a substantial amount of freight from the spot market to contracts, shippers essentially caused those spot market rates to correct downward. But shippers are struggling to take advantage of that market shift, having committed to higher prices in contract agreements. Some have since tried to renegotiate, but others see that as too risky a move in an uncertain market. Overall, truckload and LTL rates have risen in recent months, propelled by higher contract pricing and fuel surcharges that burn away any savings on the base linehaul rates. “My linehaul rates [excluding fuel] have come down based on contract negotiations and speculative use of the spot market, but I’m not seeing a decrease in overall spend,” Holly Pearce, director of logistics for battery maker C&D Trojan, said in a June 2 interview. “My savings have been overtaken by fuel surcharges.” Taking greater control Falling truckload spot rates do pull down contract rates, but it usually takes several months, and contract rates tend to not fall as far as spot rates. That is one reason carriers are pursuing new sources of contract business such as dedicated trucking, drop-and-hook trailer pools , and managed transportation services. National average trucking rates also can be misleading, as declines in some lanes may mask underlying growth in others. The average JOC all-inclusive shipper-paid spot rate from Houston to Los Angeles rose from $1.75 per mile in January to $2.40 per mile in May. Rates from Houston to Phoenix rose from $1.98 per mile in January to $2.74 per mile in May. Rates from Houston to San Francisco increased from $1.91 per mile in January to $2.51 per mile in May. All rates include fuel surcharges. In that same period, the national average shipper-paid dry-van spot rate dropped from $3.38 to $2.96 per mile on a weighted basis, according to a JOC analysis of data from Cargo Chief, DAT, and digital freight broker Loadsmart. “We ship a lot out of Texas going to Arizona, Southern California and New Mexico, and if anything, those lanes are tightening up significantly as suppliers bypass Long Beach and bring their containerized freight to Houston,” she said. Pearce and other logistics managers have had to take closer, and firmer, control of supply chains. “There’s going to be a more intense level of interaction and scrutiny with our partners,” said Pearce. “If it’s going to take more oversight and handholding, my team will do that as long as we need to.” Some companies, including C&D Trojan, have brought more logistics functions back in-house. They are also spending more time educating chief executives on the nuances of the transportation market. “They’re reading tweets and asking how the decline in spot rates affects us,” said Pearce. “We shifted heavily to contract this year to secure capacity. I’ve never had to defend against tweets before.” Trucking’s hiring surge There is no doubt the US trucking market is undergoing a correction or realignment after an overheated 2021. But the realignment does not point to contraction outside the transactional dry-van and refrigerated spot market, where demand has dropped faster than supply. For one, workers are returning to trucking at a quickening pace. For-hire trucking companies added 37,400 real jobs in April and May, according to the latest unadjusted figures from the US Bureau of Labor Statistics (BLS), far more than was expected and well beyond typical seasonality. In other words, truck seats that went empty this past winter are being filled. Some of those new employees are likely truckers who struck out on their own during the spot market gold rush of 2020 and 2021. Now that spot rates have fallen, drivers are returning to their former employers — or finding new employers — in search of regular, consistent freight at wages that have risen considerably since 2019. Like the shifting of freight from spot to contract, these drivers represent a realignment of existing capacity, rather than an actual expansion. The buildup of inventories in late 2021 and early 2022 is part of the broader realignment of inland supply chains, as well. Retailers are pulling more inventory into the US earlier than usual this year, racing to close gaps that led to stockouts last year and in some cases building an inventory glut . That implies retail inventories will continue to rise, despite inflation, fueling greater freight transportation and warehousing demand well into the summer. Industrial real estate vacancy rates have been at record lows for much of the COVID-19 pandemic, particularly in regions serving major import gateways. Congestion resulting from cargo bottlenecks at shipper receiving facilities and inland rail ramps have backed up all the way to the ports, soaking up trucking capacity. ‘Normalization’ of activity The shift of freight away from the spot market to contract carriers is perhaps the biggest factor in trucking’s realignment. Several sources told JOC.com that swing was stronger this year than in previous cycles, as US shippers sought stronger capacity commitments. As a result, shipper routing guides that determine which carriers get shipments are working, resulting in fewer tender rejections. That means freight is being accepted by primary contract carriers, rather than cascading through secondary and tertiary carriers before winding up on the spot market. At the same time, shippers are reporting fewer missed pickups and deliveries, as well as an improvement in on-time performance. “We’re seeing a normalization of activity,” explained Jason Miller, associate professor of logistics at Michigan State University. “We’re seeing economic growth, but it’s slower in 2022, which is one reason we’re not seeing the chaos we saw last year at this time. That’s causing things to feel less stressed.” Jim Nicholson, senior vice president of operations for trucking broker Loadsmart, said the correction in spot market pricing “has been a healthy event because it gets us back into a more normal state. My expectation would be for continued flattening [of spot rates].” Those rates have bounced back slightly since mid-May, Nicholson said, with Loadsmart’s spot rates rising about 5 percent off their bottom. That is a sign that additional savings based on the spot market decline may be limited. Pearce said she has noticed a significant reduction in loads being dropped — i.e., rejected at the very last minute — by carriers in May. “The first four months of the year we’re really challenging, with lots of loads dropped,” she said. “In May, for the first time, I had only four drivers drop loads across hundreds of loads in the last week of the month. “To me, that was success,” she added. “For the first time, I didn’t feel that anxiety. That’s not bad.” Still, Miller warned that “normalization” of operations does not mean a return to pre-pandemic pricing or economic activity. “The economy is never going to return to where it was before,” he said. “All the discussion of when things go back to normal or to the way they were is pointless. It could be possible that as we head into 2023 and 2024, we have a different economy in some ways than we did in 2018 or 2019.” The JOC shipper-paid spot rates are available to paid subscribers upon request. Contact William B. Cassidy at bill.cassidy@spglobal.com and follow him on Twitter: @willbcassidy . Click to enlarge. Click to enlarge. Click to enlarge.

Truck brokers

Truckload

Shippers adapting to ‘realignment’ of US trucking capacity, rates

<div class="phx-topic abstract-wrapper">The IMO tends to move at a glacial pace, but with 2030 emissions targets looming, it no longer has that luxury.</div>

The IMO tends to move at a glacial pace, but with 2030 emissions targets looming, it no longer has that luxury.

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<div class="phx-topic">The big picture: The need to narrow the price gap between fossil fuels and cleaner alternatives is the single most important challenge facing the maritime industry as it strives to meet interim emissions targets on the way to reaching net-zero by 2050. Making renewable energy more competitive will drive up investment in clean technologies and scale up sustainable fuel production, but it will rely on increased government support to bridge the operational cost gap of transitioning to alternative energy sources. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5914605_0.1.png"></img></div>A look back: Most ocean carriers have set their targets for achieving net-zero emissions at 2040 or 2045, but to achieve those ambitious goals, they must first hit the interim emissions targets of the International Maritime Organization (IMO) that require a 20% cut — striving for 30% — by 2030. That’s going to be difficult, however, given a lack of clarity around which green fuel or fuels will be supplied at an adequate scale to power the global fleet. That uncertainty has been evident in recent container ship orders, with 80% of the 1.7 million TEUs in vessel capacity ordered in the first 10 months of 2024 capable of sailing on methanol or LNG, according to Sea-web, a sister company of the Journal of Commerce within S&amp;P Global. And even as carriers hedged their ship order bets on fuels for which they have been able to secure supply agreements, carbon dioxide emissions rose sharply in 2024. Starting in late 2023, the diversion of vessels around southern Africa due to the Red Sea crisis added two weeks and over 2,000 nautical miles to voyages that normally would have transited the Suez Canal. The combination of these longer voyages, higher sailing speeds necessary for ships to maintain their schedules and resulting port congestion in Asia and Europe caused greenhouse gas (GHG) emissions to return to the peak levels recorded in 2008, according to data compiled by rate benchmarking platform Xeneta. A look ahead: The rising emissions are a worrying development for the IMO as pressure builds from across the maritime supply chain for it to adopt and roll out mid-term measures including the establishment of a global fuel standard for marine fuels and a global pricing mechanism for GHG emissions. With 176 member states — all with different agendas — the IMO tends to move at a glacial pace when adopting global regulations, but with just five years to reach 2030 emissions-reduction targets, it no longer has that luxury. Legal text for the mid-term measures must be thrashed out and approved at the next Marine Environment Protection Committee (MEPC) meeting in April 2025 so the measures can be implemented in October if the maritime industry is to have any hope of achieving its 2030 targets. The next inflection: A return to the shorter Suez Canal route, which is by no means assured in 2025, would give the maritime industry a significant leg up in its efforts to meet its looming GHG targets. Carriers would immediately slow down ships, drastically reducing fuel consumption, and the release of additional capacity would allow them to send large swathes of older, less-efficient tonnage to the demolition yard. But ultimately, closing the yawning gap in pricing between traditional and alternative fuels with a polluter-pays mechanism that taxes GHG emissions and places all carriers on the same playing field, whatever future fuel pathway they decide to sail down, is the only way the industry can meet those targets. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com.</a></div>

The big picture: The need to narrow the price gap between fossil fuels and cleaner alternatives is the single most important challenge facing the maritime industry as it strives to meet interim emissions targets on the way to reaching net-zero by 2050. Making renewable energy more competitive will drive up investment in clean technologies and scale up sustainable fuel production, but it will rely on increased government support to bridge the operational cost gap of transitioning to alternative energy sources. A look back: Most ocean carriers have set their targets for achieving net-zero emissions at 2040 or 2045, but to achieve those ambitious goals, they must first hit the interim emissions targets of the International Maritime Organization (IMO) that require a 20% cut — striving for 30% — by 2030. That’s going to be difficult, however, given a lack of clarity around which green fuel or fuels will be supplied at an adequate scale to power the global fleet. That uncertainty has been evident in recent container ship orders, with 80% of the 1.7 million TEUs in vessel capacity ordered in the first 10 months of 2024 capable of sailing on methanol or LNG, according to Sea-web, a sister company of the Journal of Commerce within S&P Global. And even as carriers hedged their ship order bets on fuels for which they have been able to secure supply agreements, carbon dioxide emissions rose sharply in 2024. Starting in late 2023, the diversion of vessels around southern Africa due to the Red Sea crisis added two weeks and over 2,000 nautical miles to voyages that normally would have transited the Suez Canal. The combination of these longer voyages, higher sailing speeds necessary for ships to maintain their schedules and resulting port congestion in Asia and Europe caused greenhouse gas (GHG) emissions to return to the peak levels recorded in 2008, according to data compiled by rate benchmarking platform Xeneta. A look ahead: The rising emissions are a worrying development for the IMO as pressure builds from across the maritime supply chain for it to adopt and roll out mid-term measures including the establishment of a global fuel standard for marine fuels and a global pricing mechanism for GHG emissions. With 176 member states — all with different agendas — the IMO tends to move at a glacial pace when adopting global regulations, but with just five years to reach 2030 emissions-reduction targets, it no longer has that luxury. Legal text for the mid-term measures must be thrashed out and approved at the next Marine Environment Protection Committee (MEPC) meeting in April 2025 so the measures can be implemented in October if the maritime industry is to have any hope of achieving its 2030 targets. The next inflection: A return to the shorter Suez Canal route, which is by no means assured in 2025, would give the maritime industry a significant leg up in its efforts to meet its looming GHG targets. Carriers would immediately slow down ships, drastically reducing fuel consumption, and the release of additional capacity would allow them to send large swathes of older, less-efficient tonnage to the demolition yard. But ultimately, closing the yawning gap in pricing between traditional and alternative fuels with a polluter-pays mechanism that taxes GHG emissions and places all carriers on the same playing field, whatever future fuel pathway they decide to sail down, is the only way the industry can meet those targets. Contact Greg Knowler at greg.knowler@spglobal.com.

Supply chain

Transport, Trade and Regulation News

Container lines

Maritime

Suez diversions, lack of IMO agreement put 2030 emissions targets at risk

<div class="phx-topic abstract-wrapper">Outside investment for project carriers is scarce, primarily because future project cargo flows are so difficult to predict.</div>

Outside investment for project carriers is scarce, primarily because future project cargo flows are so difficult to predict.

<div class="phx-topic">The big picture: The security crisis in the Red Sea and drought conditions in the Panama Canal get all the headlines, but it’s the new trade lanes needed to adjust for these disruptions that are boosting ton-mile demand and squeezing capacity in the multipurpose and heavy-lift (MPV/HL) sector. Those dynamics are expected to keep MPV/HL rates at current levels through the first quarter of 2025, but as new tonnage from the competing container and roll-on/roll-off (ro/ro) sectors hits the water, non-heavy-lift MPV rates are likely to weaken. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5914605_0.1.png"></img></div>A look back: The increase in project cargo demand that most market players expected 12 months ago failed to materialize, with total seaborne dry cargo demand rising just 0.8% in 2024, according to S&amp;P Global Market Intelligence. However, increased ton-mile demand caused by ongoing draft restrictions in the Panama Canal and the Red Sea crisis diverting vessels away from the Suez Canal kept tonnage availability tight and charter rates elevated throughout the year. As of November, the latest month for which data is available, daily charter rates for 12,500-deadweight ton (dwt) “F-Type” ships stood at $13,157, up 12.8% from the beginning of the year and 7.8% from the same month in 2023, according to the Toepfer Multipurpose Index. This was 43% below the pandemic peak recorded in July 2022 but still twice the pre-COVID-19 average. A look ahead: If US President-elect Donald Trump delivers his agenda as promised, energy production and generation-related general cargo demand could shift dramatically. But questions remain as to which of Trump’s stated policy goals, including repealing Biden administration rules for power generation and weakening methane emission standards for the oil and gas sector, will actually be implemented. For now, forecasts for project cargo remain strong across both the energy and construction sectors, with the growing power needs of data centers expected to drive additional freight volumes. Of the 5,216 energy-related projects currently under discussion globally, just 19% have reached a final investment decision, according to an October report from the Energy Industry Council. The remaining 81% equates to a significant amount of potential cargo in limbo, adding to the uncertainty for project cargo demand and further discouraging newbuild vessel orders beyond capacity replacement. Demolition levels are also expected to remain subdued as cargo demand is high enough to keep overage tonnage employed despite increasing carbon taxes and related regulations. Given the existing order book of 175 MPVs and conservative estimates for newbuilding investment, the MPV/HL fleet is forecast to grow an average of just 1.7% per year through 2026, according to a Journal of Commerce analysis that accounts for potential order slippage, additional new orders and demolition sales. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="58060bd4-8c46-4e05-8d08-412424279b07"></dynamic-object></div>The next inflection: Outside investment for project carriers is scarce, primarily because future project cargo flows are so difficult to predict. This could lead to a further tightness in heavy-lift capable modern tonnage over the next few years and a corresponding rise in charter rates for this vessel type. Of particular concern for some shippers is a lack of newbuilding deck carriers, vessels particularly suited for moving large, heavy pieces of equipment including modules. For non-heavy-lift breakbulk shippers, the avalanche of container ships, bulk carriers and ro/ro vessels being delivered over 2025 and 2026 will keep competition for their cargoes high, likely weakening MPV rates. Contact Susan Oatway at <a href="mailto:susan.oatway@spglobal.com">susan.oatway@spglobal.com.</a></div>

The big picture: The security crisis in the Red Sea and drought conditions in the Panama Canal get all the headlines, but it’s the new trade lanes needed to adjust for these disruptions that are boosting ton-mile demand and squeezing capacity in the multipurpose and heavy-lift (MPV/HL) sector. Those dynamics are expected to keep MPV/HL rates at current levels through the first quarter of 2025, but as new tonnage from the competing container and roll-on/roll-off (ro/ro) sectors hits the water, non-heavy-lift MPV rates are likely to weaken. A look back: The increase in project cargo demand that most market players expected 12 months ago failed to materialize, with total seaborne dry cargo demand rising just 0.8% in 2024, according to S&P Global Market Intelligence. However, increased ton-mile demand caused by ongoing draft restrictions in the Panama Canal and the Red Sea crisis diverting vessels away from the Suez Canal kept tonnage availability tight and charter rates elevated throughout the year. As of November, the latest month for which data is available, daily charter rates for 12,500-deadweight ton (dwt) “F-Type” ships stood at $13,157, up 12.8% from the beginning of the year and 7.8% from the same month in 2023, according to the Toepfer Multipurpose Index. This was 43% below the pandemic peak recorded in July 2022 but still twice the pre-COVID-19 average. A look ahead: If US President-elect Donald Trump delivers his agenda as promised, energy production and generation-related general cargo demand could shift dramatically. But questions remain as to which of Trump’s stated policy goals, including repealing Biden administration rules for power generation and weakening methane emission standards for the oil and gas sector, will actually be implemented. For now, forecasts for project cargo remain strong across both the energy and construction sectors, with the growing power needs of data centers expected to drive additional freight volumes. Of the 5,216 energy-related projects currently under discussion globally, just 19% have reached a final investment decision, according to an October report from the Energy Industry Council. The remaining 81% equates to a significant amount of potential cargo in limbo, adding to the uncertainty for project cargo demand and further discouraging newbuild vessel orders beyond capacity replacement. Demolition levels are also expected to remain subdued as cargo demand is high enough to keep overage tonnage employed despite increasing carbon taxes and related regulations. Given the existing order book of 175 MPVs and conservative estimates for newbuilding investment, the MPV/HL fleet is forecast to grow an average of just 1.7% per year through 2026, according to a Journal of Commerce analysis that accounts for potential order slippage, additional new orders and demolition sales. The next inflection: Outside investment for project carriers is scarce, primarily because future project cargo flows are so difficult to predict. This could lead to a further tightness in heavy-lift capable modern tonnage over the next few years and a corresponding rise in charter rates for this vessel type. Of particular concern for some shippers is a lack of newbuilding deck carriers, vessels particularly suited for moving large, heavy pieces of equipment including modules. For non-heavy-lift breakbulk shippers, the avalanche of container ships, bulk carriers and ro/ro vessels being delivered over 2025 and 2026 will keep competition for their cargoes high, likely weakening MPV rates. Contact Susan Oatway at susan.oatway@spglobal.com.

Breakbulk carriers

Ro/ro cargo

Heavy-haul transport

Project cargo

Breakbulk News

US policy uncertainty clouds MPV/HL outlook going into 2025

<div class="phx-topic abstract-wrapper">Shippers must weigh the merits of a single-source relationship on drayage through key ports over splitting volume among regional and national carriers, or even brokers. </div>

Shippers must weigh the merits of a single-source relationship on drayage through key ports over splitting volume among regional and national carriers, or even brokers.

<div class="phx-topic">Industry dynamics are driving shippers to diversify their allocation of volume to drayage carriers in a bid to manage increased volatility through the US ports they use for their import supply chains. Whereas shippers have historically tended to rely on a single drayage carrier in a specific gateway, the underlying technology and changing attitudes toward resilience on a chronically overlooked transportation leg are enabling that diversification. The change impacts a part of the industry that is especially fragmented, with more than 12,000 drayage carriers operating in the US on a local, regional or national basis, accounting for more than 49,000 drivers, according to the Intermodal Association of North America (IANA). And that fragmentation includes everything from national providers with as many as 2,500 trucks, to owner-operators running single-vehicle businesses. Drayage is also notorious for thin margins for operators, a reality that only deviated from the norm temporarily during the pandemic. For shippers, the hard work of managing a network of dray partners, as opposed to a single relationship, is theoretically offset by better performance and more flexibility to get the capacity required through a given gateway. While drayage capacity has been largely loose in aggregate the past two years despite solid container growth in 2024, shippers still deal with episodic periods of tightness week to week or through specific ports. “The landscape has changed significantly over the last five years,” said Reade Kidd, CEO of EDRAY, a managed transportation platform that helps importers, including Crate &amp; Barrel, Floor &amp; Decor and Samsung, to coordinate their shipments. “Pre-COVID, you saw many shippers with large volume lanes allocated to one dray carrier, leveraging one contract, one integration and one feedback loop,” Kidd said “While there are synergies and benefits from increasing scale with one provider, we have seen a significant adoption of strategies around diversification of carriers, ports and overall networks across the industry.” Michael Kroul, CEO of drayage broker KTI, said the days of using a single carrier for large volumes in a single gateway are largely gone. “There are examples of shippers only using one primary carrier in a market, but in truth they always now have backups as COVID taught them that exceptions can occur no matter how tight the bond is,” Kroul said. “We have shippers use us and two other carriers in a market, and others put 30% for spot price moves. Others stick solely through what they granted through their requests for proposal [RPFs]. My safe answer would be four to five at minimum per market, even if you primarily use one for everything.” <h3>No single solution </h3>As with every other aspect of international logistics, there is no one-size-fits-all strategy that applies to all shippers, or even for a single shipper across all the US import gateways they use. The decision to allocate cargo to more than one dray carrier is primarily influenced by the overall volume moved and the week-to-week consistency of that volume. “If you have 50 containers a week on a lane, that could be ideal to have multiple carriers on the lane,” Kidd said. “However, if the volume is not consistent — 30 containers on week one and 70 containers on week two — you could be at risk of increasing bobtails if you diversify your carrier mix.” There are ways to offset that inconsistency while using multiple carriers through the use of empty container pools and dedicated chassis programs. But most shippers have historically tended to take the path of least resistance and just pick one drayage carrier, or hand off the allocation of drayage volume to a third-party logistics provider (3PL) or shipping line, many of which route that to a favored or in-house carrier. Kidd advocates for some sort of split — generally between 50-50 and 70-30 between two carriers — that keeps options open and costs in a manageable band. “We have a number of shippers with five or more carriers on lanes, some of which are due to certain container types, like overweight, refrigerated, or hazardous, and some are just due to a high-volume lane that they keep highly competitive across their carriers,” he said. <h3>Benefit of multiple relationships </h3>Kroul said the complexity of the shipper’s needs at destination also determines the extent to which they are willing to diversify, or to stick with one carrier. “It depends on the time of year, the specific gateway, whether it’s a port or inland move, the equipment needed, and the delivery need,” he said. “Do they need transload, a distribution center, direct to warehouse, a drop yard, a reload?” Additional relationships are always of benefit, said Paul Brashier, vice president of global supply chain at the 3PL ITS Logistics, which specializes in drayage. For instance, he said that a shipper may add a 3PL not just to diversify its drayage options, but to add a specialized service, such as warehousing or domestic truckload, in addition to drayage. “Depending on the complexity of a shipper’s supply chain, it is usually best to delineate the spend by the mode or services supplied,” he said. “If a shipper is going to bring on multiple partners, it is best to ensure that they add a mode or service diversity to your portfolio.” Kroul agreed: “That is why you have seen large national carriers add transload, container yards, drop yards, and warehouses in specific areas,” he said. “The goal is to lure large national enterprise accounts that need all of those services. Some large national carriers, like IMC and RoadOne, have done a great job of that.” But even all large shippers are not alike in their usage of national drayage providers with broad service capabilities. “Many like to prioritize the local carriers or the brokers with the relationships with the local carriers, and then work with a broker like us and a large national carrier,” Kroul said. <h3>Ease of procurement </h3>Kidd said a proliferation of transportation procurement tools, which simplify the bidding process for shippers, is allowing importers that previously single-sourced to dabble in dual sourcing. “This enables shippers to try out a new carrier in a market, putting them at a smaller percentage — around 20% of their volume through a gateway — and earning their way into the network,” he said. Kidd ultimately recommends shippers with a significant enough threshold of volume, even if inconsistent, to dual source because it minimizes the vulnerability to both shippers and their capacity providers. “If one dray carrier has 30 containers a week and then needs to surge up to 100 a week during certain times of the year, that could be challenging,” he said. “As long as freight is balanced, having two carriers evenly split, each would need to surge from 15 to 50, instead of 30 to 100, containers for that week. Having a smaller volume of surge is easier for an asset-based carrier to absorb.” <h3>Size of carrier a factor </h3>Ian Weiland, COO at Southern California drayage provider Junction Collaborative Transports, said the size of the asset-based carrier factors into these decisions as well. Junction operates more than 350 trucks, so Weiland said the carrier can “easily commit to a 2,500-TEU to 4,000-TEU annual account on the fly, and it does not cause an operational disaster.” For a smaller dray carrier, one with about 10 trucks, a comfortable volume commitment level would be approximately 300 TEU to 500 TEUs per year. “Many in the drayage industry try to sell themselves or their services as if they are larger than they actually are,” Weiland said. “I assume it has to do with appealing to a larger account.” Once a small carrier lands a large account, it then has to figure out how to provide the capacity, Weiland said, and if the account leaves, that carrier is back to square one, sometimes with excess trucks that it cannot immediately fill. As a local operator, Weiland also has to consider how Junction fits into a larger framework where its customers have volume moving through gateways outside of Southern California. Junction could theoretically be the sole provider in Southern California, but not the sole provider nationwide, so some of its customers may use a national dray carrier for some volume in its territory in service of maintaining a strong relationship with the national carrier. “It really depends on the volume per gateway,” Weiland said. “We have a few customers where we are the only carrier at 300-plus containers per month. We have some where we are the primary, but at around 50% of their total volume.” Diversification is primarily about giving shippers options, and a part of that is maintaining communication with both asset-based and broker partners, sources emphasized. “We have a customer who has not given us a load in almost a year when we used to do a ton with them because the market for their particular commodity went south,” Kroul said. “They had to give more to their primary carrier. But they talked to us every week. And sure enough, two weeks ago they sent more than 50 loads. Relationships matter.” Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. </div>

Industry dynamics are driving shippers to diversify their allocation of volume to drayage carriers in a bid to manage increased volatility through the US ports they use for their import supply chains. Whereas shippers have historically tended to rely on a single drayage carrier in a specific gateway, the underlying technology and changing attitudes toward resilience on a chronically overlooked transportation leg are enabling that diversification. The change impacts a part of the industry that is especially fragmented, with more than 12,000 drayage carriers operating in the US on a local, regional or national basis, accounting for more than 49,000 drivers, according to the Intermodal Association of North America (IANA). And that fragmentation includes everything from national providers with as many as 2,500 trucks, to owner-operators running single-vehicle businesses. Drayage is also notorious for thin margins for operators, a reality that only deviated from the norm temporarily during the pandemic. For shippers, the hard work of managing a network of dray partners, as opposed to a single relationship, is theoretically offset by better performance and more flexibility to get the capacity required through a given gateway. While drayage capacity has been largely loose in aggregate the past two years despite solid container growth in 2024, shippers still deal with episodic periods of tightness week to week or through specific ports. “The landscape has changed significantly over the last five years,” said Reade Kidd, CEO of EDRAY, a managed transportation platform that helps importers, including Crate & Barrel, Floor & Decor and Samsung, to coordinate their shipments. “Pre-COVID, you saw many shippers with large volume lanes allocated to one dray carrier, leveraging one contract, one integration and one feedback loop,” Kidd said “While there are synergies and benefits from increasing scale with one provider, we have seen a significant adoption of strategies around diversification of carriers, ports and overall networks across the industry.” Michael Kroul, CEO of drayage broker KTI, said the days of using a single carrier for large volumes in a single gateway are largely gone. “There are examples of shippers only using one primary carrier in a market, but in truth they always now have backups as COVID taught them that exceptions can occur no matter how tight the bond is,” Kroul said. “We have shippers use us and two other carriers in a market, and others put 30% for spot price moves. Others stick solely through what they granted through their requests for proposal [RPFs]. My safe answer would be four to five at minimum per market, even if you primarily use one for everything.” No single solution As with every other aspect of international logistics, there is no one-size-fits-all strategy that applies to all shippers, or even for a single shipper across all the US import gateways they use. The decision to allocate cargo to more than one dray carrier is primarily influenced by the overall volume moved and the week-to-week consistency of that volume. “If you have 50 containers a week on a lane, that could be ideal to have multiple carriers on the lane,” Kidd said. “However, if the volume is not consistent — 30 containers on week one and 70 containers on week two — you could be at risk of increasing bobtails if you diversify your carrier mix.” There are ways to offset that inconsistency while using multiple carriers through the use of empty container pools and dedicated chassis programs. But most shippers have historically tended to take the path of least resistance and just pick one drayage carrier, or hand off the allocation of drayage volume to a third-party logistics provider (3PL) or shipping line, many of which route that to a favored or in-house carrier. Kidd advocates for some sort of split — generally between 50-50 and 70-30 between two carriers — that keeps options open and costs in a manageable band. “We have a number of shippers with five or more carriers on lanes, some of which are due to certain container types, like overweight, refrigerated, or hazardous, and some are just due to a high-volume lane that they keep highly competitive across their carriers,” he said. Benefit of multiple relationships Kroul said the complexity of the shipper’s needs at destination also determines the extent to which they are willing to diversify, or to stick with one carrier. “It depends on the time of year, the specific gateway, whether it’s a port or inland move, the equipment needed, and the delivery need,” he said. “Do they need transload, a distribution center, direct to warehouse, a drop yard, a reload?” Additional relationships are always of benefit, said Paul Brashier, vice president of global supply chain at the 3PL ITS Logistics, which specializes in drayage. For instance, he said that a shipper may add a 3PL not just to diversify its drayage options, but to add a specialized service, such as warehousing or domestic truckload, in addition to drayage. “Depending on the complexity of a shipper’s supply chain, it is usually best to delineate the spend by the mode or services supplied,” he said. “If a shipper is going to bring on multiple partners, it is best to ensure that they add a mode or service diversity to your portfolio.” Kroul agreed: “That is why you have seen large national carriers add transload, container yards, drop yards, and warehouses in specific areas,” he said. “The goal is to lure large national enterprise accounts that need all of those services. Some large national carriers, like IMC and RoadOne, have done a great job of that.” But even all large shippers are not alike in their usage of national drayage providers with broad service capabilities. “Many like to prioritize the local carriers or the brokers with the relationships with the local carriers, and then work with a broker like us and a large national carrier,” Kroul said. Ease of procurement Kidd said a proliferation of transportation procurement tools, which simplify the bidding process for shippers, is allowing importers that previously single-sourced to dabble in dual sourcing. “This enables shippers to try out a new carrier in a market, putting them at a smaller percentage — around 20% of their volume through a gateway — and earning their way into the network,” he said. Kidd ultimately recommends shippers with a significant enough threshold of volume, even if inconsistent, to dual source because it minimizes the vulnerability to both shippers and their capacity providers. “If one dray carrier has 30 containers a week and then needs to surge up to 100 a week during certain times of the year, that could be challenging,” he said. “As long as freight is balanced, having two carriers evenly split, each would need to surge from 15 to 50, instead of 30 to 100, containers for that week. Having a smaller volume of surge is easier for an asset-based carrier to absorb.” Size of carrier a factor Ian Weiland, COO at Southern California drayage provider Junction Collaborative Transports, said the size of the asset-based carrier factors into these decisions as well. Junction operates more than 350 trucks, so Weiland said the carrier can “easily commit to a 2,500-TEU to 4,000-TEU annual account on the fly, and it does not cause an operational disaster.” For a smaller dray carrier, one with about 10 trucks, a comfortable volume commitment level would be approximately 300 TEU to 500 TEUs per year. “Many in the drayage industry try to sell themselves or their services as if they are larger than they actually are,” Weiland said. “I assume it has to do with appealing to a larger account.” Once a small carrier lands a large account, it then has to figure out how to provide the capacity, Weiland said, and if the account leaves, that carrier is back to square one, sometimes with excess trucks that it cannot immediately fill. As a local operator, Weiland also has to consider how Junction fits into a larger framework where its customers have volume moving through gateways outside of Southern California. Junction could theoretically be the sole provider in Southern California, but not the sole provider nationwide, so some of its customers may use a national dray carrier for some volume in its territory in service of maintaining a strong relationship with the national carrier. “It really depends on the volume per gateway,” Weiland said. “We have a few customers where we are the only carrier at 300-plus containers per month. We have some where we are the primary, but at around 50% of their total volume.” Diversification is primarily about giving shippers options, and a part of that is maintaining communication with both asset-based and broker partners, sources emphasized. “We have a customer who has not given us a load in almost a year when we used to do a ton with them because the market for their particular commodity went south,” Kroul said. “They had to give more to their primary carrier. But they talked to us every week. And sure enough, two weeks ago they sent more than 50 loads. Relationships matter.” Contact Eric Johnson at eric.johnson@spglobal.com .

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<div class="phx-topic abstract-wrapper">The charges come as spot rates for ex-Asia cargo into the US have climbed sharply over the past month.</div>

The charges come as spot rates for ex-Asia cargo into the US have climbed sharply over the past month.

<div class="phx-topic">The number of container lines preparing surcharges ahead of potential disruption to US East and Gulf coast service networks has reached at least five as a Jan. 15 longshore strike deadline nears and new carrier alliances launch. CMA CGM, Yang Ming and Hapag-Lloyd said they would implement surcharges ranging from $1,125 to $1,700 per FEU linked to the expected disruption should 45,000 dockworkers from the International Longshoremen’s Association (ILA) walk off the job in less than two weeks.The three carriers join Mediterranean Shipping Company and Zim Integrated Shipping, <a href="https://www.joc.com/article/trans-atlantic-carriers-cue-fresh-surcharges-for-early-2025-risks-5908990">which in December announced they could implement disruption-related surcharges</a> in mid-January. Zim cited the potential ILA strike, while MSC said its charge was linked to the restructuring of its trans-Atlantic network from Feb. 1 when it will <a href="https://www.joc.com/article/mscs-global-scale-enables-standalone-network-coverage-5726563">begin operating as a standalone carrier following its exit from the 2M Alliance with Maersk</a>. CMA CGM said Thursday it will implement a $1,500 per unit “Peak Season Surcharge” (PSS) on Jan. 15 for all cargo from the Indian Subcontinent, Middle East, Red Sea and Egypt to the US East and Gulf coasts.Hapag-Lloyd said it will implement an $850 per TEU or $1,700 per FEU “Work Disruption Surcharge” (WDS) and “Work Interruption Destination Surcharge” (WID) on any cargo gated in on or after Jan. 20. The WID would apply to trans-Pacific cargo, while the WDS would cover trans-Atlantic shipments, the carrier said.“This surcharge covers additional costs from labor disruptions, strikes, slowdowns, unrest, congestion, and other unforeseen events that may delay operations and incur extra handling, storage, and feeder service costs,” Hapag-Lloyd said.Yang Ming will implement a “Port Congestion Surcharge” (PCS) on Jan. 15 for all cargo moving into the US and Canada of $800 per TEU and $1,000 per FEU. The carrier said the potential labor unrest could increase its costs. Sources said other carriers are planning to implement surcharges, which are often actually negotiated between carriers and their customers down from the originally announced amount.“The others are hinting at it with their adjustments, just not openly stating it,” said a freight forwarding source. The announced surcharges come as <a href="https://www.joc.com/article/trans-pacific-spot-rates-on-the-rise-amid-pre-lunar-new-year-cargo-bump-5912763">spot rates for ex-Asia cargo into the US have climbed sharply in the past month</a>, according to Platts, a Journal of Commerce sister company within S&amp;P Global. The Platts Container Index measured trans-Pacific East Coast import rates at $6,400 per FEU and West Coast rates at $5,000 per FEU as of Jan 2. Contact Laura Robb at <a href="mailto:Laura.Robb@spglobal.com">laura.robb@spglobal.com</a>. </div>

The number of container lines preparing surcharges ahead of potential disruption to US East and Gulf coast service networks has reached at least five as a Jan. 15 longshore strike deadline nears and new carrier alliances launch. CMA CGM, Yang Ming and Hapag-Lloyd said they would implement surcharges ranging from $1,125 to $1,700 per FEU linked to the expected disruption should 45,000 dockworkers from the International Longshoremen’s Association (ILA) walk off the job in less than two weeks. The three carriers join Mediterranean Shipping Company and Zim Integrated Shipping, which in December announced they could implement disruption-related surcharges in mid-January. Zim cited the potential ILA strike, while MSC said its charge was linked to the restructuring of its trans-Atlantic network from Feb. 1 when it will begin operating as a standalone carrier following its exit from the 2M Alliance with Maersk . CMA CGM said Thursday it will implement a $1,500 per unit “Peak Season Surcharge” (PSS) on Jan. 15 for all cargo from the Indian Subcontinent, Middle East, Red Sea and Egypt to the US East and Gulf coasts. Hapag-Lloyd said it will implement an $850 per TEU or $1,700 per FEU “Work Disruption Surcharge” (WDS) and “Work Interruption Destination Surcharge” (WID) on any cargo gated in on or after Jan. 20. The WID would apply to trans-Pacific cargo, while the WDS would cover trans-Atlantic shipments, the carrier said. “This surcharge covers additional costs from labor disruptions, strikes, slowdowns, unrest, congestion, and other unforeseen events that may delay operations and incur extra handling, storage, and feeder service costs,” Hapag-Lloyd said. Yang Ming will implement a “Port Congestion Surcharge” (PCS) on Jan. 15 for all cargo moving into the US and Canada of $800 per TEU and $1,000 per FEU. The carrier said the potential labor unrest could increase its costs. Sources said other carriers are planning to implement surcharges, which are often actually negotiated between carriers and their customers down from the originally announced amount. “The others are hinting at it with their adjustments, just not openly stating it,” said a freight forwarding source. The announced surcharges come as spot rates for ex-Asia cargo into the US have climbed sharply in the past month , according to Platts, a Journal of Commerce sister company within S&P Global. The Platts Container Index measured trans-Pacific East Coast import rates at $6,400 per FEU and West Coast rates at $5,000 per FEU as of Jan 2. Contact Laura Robb at laura.robb@spglobal.com .

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The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

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Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

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