Can a Hard 2020 Help Your 2021 FTL Freight?
The full truckload (FTL) market typically shows consistent peaks and valleys throughout the year. But the ups and downs of 2020 have carriers, shippers and consignees spinning.
Most shippers don't have the luxury of keeping up with the daily fluctuations in carrier volume, rates and global news impacting the costs and effectiveness of their respective shipping operations. But, because the transportation industry's challenges are carrying into 2021, it's critical for small and mid-size businesses (SMBs) to learn from the rollercoaster ride we're on to build stronger logistics for next year.
To help you make sense of unpredictable, dizzying market conditions, we put together top trends and insights for smarter, informed planning as you prepare for 2021.
FTL's one big thing in 2020
Even in the most complex times, shipping comes down to the simple math of supply and demand. And make no mistake, we're living in historically complex times. You would normally think of supply and demand in terms of your inventory and the number of orders in the pipeline. In FTL, supply is carrier capacity (the number of trucks, trailers, drivers, etc.) and demand is the booking volume placed with FTL carriers. After the economic plunge from the pandemic, all-time highs in volume (read: demand) in the fall pushed the capacity crunch of the past few years to its tightest point yet. This in turn changed the status quo between shippers and carriers, leading to:
- Swelling carrier rates
- Above-average and additional surcharges
- Near-impossible availability to book freight
These trends will continue as long as containers remain full. To beat these challenges, some shippers try to break full freight into less-than-truckload (LTL) or even parcel shipments. This flood of orders has all shipping modes full, and freight rejection rates continue to climb – even past 25% at times.1
Going into the new year, shippers should expect more of the same. Even when order volume drops off after the holidays, restocking inventory from ocean liners will fill trucks into the first quarter. These challenges paint a dark picture of higher costs and low availability for shippers. But, it's not all doom and gloom. SMBs willing to adapt will find plenty of resources and even opportunities for stronger shipping operations and customer relationships despite the tough road ahead.
Managing FTL in 2021
While there is some uncertainty going into 2021, that doesn't mean shippers should sit back and wait. We know enough about carrier capacity (or lack thereof) to suggest that SMBs adjust their logistics. Shippers should consider more flexible processes and systems equipped to roll with the times – even week-to-week changes. Finding the right strategy depends largely on the unique circumstances of each SMB. However, these are key considerations based on the trends:
- Stay ahead of tight capacity. If shippers better understand their shipping needs, factoring customer demand, inventory storage, packaging requirements and carrier conditions, they may be able to book freight earlier. This loosens availability and may also help with rates.
- Negotiate short-term carrier contracts. Many shippers prefer long-term negotiated rates with carriers – especially if they're shipping high volume throughout the year. However, market uncertainty could lead to rate hikes or rapid drop-offs. By negotiating carrier rates monthly or separately for each shipment, you have a better chance at fair market prices.
- Expand your partnerships. Many shippers rely on the same carriers due to comfort level, reduced complexity or other factors. Unfortunately, this is not the time to play favorites. We're seeing not only higher freight rejection rates, but volume is so high, there's a chance carriers may start limiting their shipping partners. Widening your carrier network could help book on time and at fairer costs.
When building a 2021 plan, don't forget about your customers. Shipment delays and damaged products occur more frequently due to all of the complications mentioned above. But with the right approach, businesses can build stronger customer relationships.
Communication emerged as one of the biggest trends due to 2020's shipping woes. Consignees want open, proactive updates and access to information. A quick phone call to a consignee may have been fine at the beginning of 2020. But, there's a growing trend toward "parcel-like" traceability and shipment insights for freight. Shippers should work closely with their customers to understand the depth of information they require and seek resources or technology to accommodate their needs.
Resources for FTL innovation
The key to making strategic changes to tackle the challenges ahead starts with building the right business requirements. SMB shippers usually lack the dedicated resources to keep up with industry updates, let alone the global economic currents that eventually affect their operations. However, these businesses could (and should) learn as much as possible from customers. This includes:
- Peak season and high-volume periods
- Fast and slow-moving products
- Delivery expectations
- Communication needs and depth of information
Talking directly with a few key accounts or sending out a survey could lead to revelations that inform smart transportation changes. The customer is always right, so why not listen?
A second, and equally important resource, is an industry insider. Third-party logistics companies (3PLs) for example, often act as the middleman between shippers and carriers. As FTL freight brokers, these partners will know which carriers have limited availability and rate fluctuations, and can offer advice for better internal processes. A 3PL that covers FTL, LTL and parcel can help create a holistic approach to shipping. If your operations need to grow to accommodate more carriers, additional value-add services or there's a scramble to book freight at decent rates, a 3PL with a transportation management system (TMS) can help streamline your logistics.
Plan for tomorrow, today
The biggest advice we have for shippers is to be realistic and to understand the whys. The market, unfortunately, isn't changing soon – calling for SMBs to build agile shipping operations. A 3PL can help, but only if a business is willing to listen to the market, customers and partners.
Worldwide Express helped tens of thousands of SMBs navigate the unpredictable shipping conditions throughout 2020, and we can help you prepare for next year. Connect with us and let's build a shipping strategy that gives you confidence – even in uncertain times.
1 Rejection rates hit 2020 high – FreightWaves NOW, FreightWaves
Jimmy Carden, September 2020