Market volatility reinforces the need to partner with a strategic freight sales management firm. Domestic transportation networks have tremendous constraints on them pointing to a robust freight shipping market through the rest of the year and quite possibly, well into 2022. There are a number of factors at play which are creating somewhat of a perfect storm of extreme demand and unprecedented capacity issues.
Much of the demand is being driven by consumers stuck at home during the pandemic and spending their disposable income on durable goods, home improvements, including furniture, as well as home fitness equipment, much of which is imported. Currently, there are approximately 30 container ships anchored in San Pedro Bay waiting for berths to unload their cargo and adding even more freight into the domestic network. By some accounts, there is no end in sight to this scenario through the summer. In addition, the tremendous shift to online grocery and other e-commerce channels is further increasing demand for trucking, particularly in the final mile sector.
All of this increased demand comes at a time when the driver shortage has been exacerbated by COVID-19 and other, more permanent dynamics, so there appears to be no end in sight to the capacity crunch. Some of the long-term factors in play, to which there are no immediate solutions, include the aging driver population, the Drug and Alcohol Clearinghouse and the overall perception of truck driving being a less than desirable profession, will continue to contribute to shortage. The Drug and Alcohol Clearinghouse, by most accounts has taken approximately 50,000 drivers off the road, many of them permanently, since its inception in January 2020. Another traditional source of new commercial drivers has been driver training schools. Due to COVID regulations, class sizes have been greatly reduced and the schools have only been able to convey about 40% of the typical graduates in the last year.
The extreme, and in some cases unprecedented, winter weather conditions in large swaths of the country in mid-February are still creating issues in the natural rhythm of many carrier’s networks. Thanks to the record-breaking Arctic outbreak that stretched all the way into Texas, February was the coldest it has been across the US in over 30 years, says the National Oceanic and Atmospheric Administration. As of this writing, another major winter storm is making its way out of the Rockies and across the Northern Plains, further exacerbating an already over-taxed OTR transportation network. Many trucks were shut down for a period of time and many carriers are still adjusting to get their normal route system flows back on their usual cadence. As is always the case, the severe winter takes a tremendous toll on equipment and it’s certain that a number of trucks will be permanently taken out of the capacity equation.
Recapping and looking ahead, the elevated pricing environment in favor of the carriers should persist for the remainder of 2021. Shippers should expect to see low double-digit rate inflation on contract pricing in the 2021 bid cycle while spot-market rates have risen 35% YOY.
How can a carrier benefit from working with a freight sales management partner like Select Carriers in this environment? As one carrier exec told me last week, “right now I have more freight than I know what to do with”. A familiar refrain is echoed in many of our recent conversations with our carrier partners. While this is undoubtedly the case, is all of that freight efficient and profitable? Does it all mesh well within your network in helping to ensure predictable runs, compensation and home-time for your drivers?
We believe the time is right to examine all of these factors and to determine if there may be opportunities to fill some holes or to upgrade the quality of the freight in certain lanes within your network. We have numerous opportunities across our customer base on consistent, contracted business with rates that are commensurate with the service(s) being provided. We believe in creating mutually beneficial partnerships for our carriers and our customers that truly want to become one of your shippers of choice.
Let’s start a conversation today to see how we may be able to assist in your freight sales and business development with the overall goal of improving your network yield. Please contact me at 570-905-0956.
About the author: Jeff Miller, VP of Sales & Marketing at Select Carriers, has extensive experience with freight sales management and is currently serving his second term as a member of the IRTA (International Refrigerated Transportation Association) Board of Directors. He can be reached at [email protected] .