The pandemic has made planning for 2021 extremely difficult for businesses, and shippers are no different. As they look to lock in capacity and rates for next year, several unanswered questions are complicating the process:
- Are we in a freight peak?
- Is COVID-19 driving rates artificially higher?
- Is this the new normal for freight rates?
Management from some of the nation’s largest truckload carriers spoke recently during the Stephens Annual Investment Conference, and the conclusion they have reached? No one knows. Werner Enterprises (NASDAQ: WERN) CEO Derek Leathers said peak season ramped sooner than normal this year and Schneider National (NYSE: SNDR) CEO and President Mark Rourke said it was “hard to tell the difference” between peak conditions as the company’s business hasn’t seen much seasonality since July.
Leathers noted that drivers are in short supply due to higher retirement rates and driver training schools turning out graduates at just 60% to 70% of pre-pandemic levels. The Drug & Alcohol Clearinghouse is also having an impact, with 90% of drivers that fail tests then not starting the the return-to-duty process.
“There’s really an opportunity for a really extended cycle in my view because the capacity constraints and obstacles are going to be there, and they’re very real,” Leathers said.
In October, UBS equities analyst Tom Wadewitz predicted shippers will see double-digit rate increases in 2021.
“The current extreme tightness in the TL spot market plus a constructive outlook on freight point to double-digit rate increases in 2021,” he said, adding that spot market metrics “show a market that remains on a trend of further tightening.”
Neither development is good news for shippers looking to manage their costs in 2021. As requests for proposals (RFPs) are sent out, shippers may be surprised by the offers they receive.
While some fundamentals – such as available industry capacity and overall freight volumes – are out of their control, shippers do have some levers they can pull to better manage costs. And it starts with deploying the right technology tools.
RFPs offer several insights for shippers, including what capacity is likely to be available and at what price. As most know, though, even a contract is not enough to ensure cost certainty. A carrier may decide the spot market is more profitable and shift capacity there and away from the shippers’ business.
Having the necessary insight into your own logistics operation becomes an imperative. Using a transportation management system (TMS) is one tool shippers should be using to manage their entire transportation spend.
nVision Global offers the IMPACT TMS, and when it is paired with additional services such as freight auditing and payment, business analytics, procurement tools and benchmarking, a shipper can get a leg up on the competition.
nVision has noted in the past that some shippers may be operating under old rate contracts. Others may not have the scale necessary to negotiate lower rates. Add in market uncertainties’ and shippers may be paying more to move their freight than they should.
nVision Global has tariff rate agreements with thousands of less-than-truckload and truckload providers, and by negotiating on a shipper’s behalf, can often secure a lower rate. nVision also has access to thousands of rate-related data points that allow it to benchmark one shipper’s rates against industry averages, highlighting wasted transportation spend.
Additionally, shippers can conduct a freight audit. nVision Global’s technology streamlines this process, comparing a company’s invoices and assessing their accuracy. Using automated business rules, the company said it can often lead to transportation spend savings of up to 15%.
Benchmarking is a key part of any analysis of freight spend and is critical when it comes to the RFP process. As previously mentioned, a shipper may be paying higher contract rates than necessary, and this is often true if there are no comparison rates.
Using anonymized data sets, nVision Global leverages more than 150 million transactions conducted annually from over 19,500 transportation providers to gauge a shipper’s true level of competitiveness. Benchmarking allows shippers to identify areas where they are not competitive or may be overpaying on their shipments. Whether it is by lane, geographic area, shipment type or some other metric, the ability to benchmark is the final crucial step in generating overall efficiency of the supply chain.
As shippers consider rate quotes for their 2021 freight, having the right data in place is essential to ensuring those rates are in line with competitors and appropriate for the lanes. The wrong technology will generate the wrong data sets. nVision Global’s technology solutions like its IMPACT TMS are designed to ensure shippers get the right services at the right prices.
