The use of full truckload shipping is rising in popularity, resulting from its lower cost as compared to less-than-truckload (LTL) shipping. Unfortunately, the use of full truckload shipments and expenditures have hit an all-time high, reports Kate Patrick of Supply Chain Dive. These rates will have natural implications for smaller shippers seeking to lower overall transportation and freight spend, and paired with a “blurred lines between peak shipping and shopping seasons,” shippers will experience increasing trouble when trying to procure full truckload capacity.
The Problem: Capacity Woes Are Becoming Reality
According to the Journal of Commerce, full truckload rates are rising in demands to tight capacity, with some companies experiencing a 35-percent year-over-year rate increase. Industrywide rates rose 25 percent in January, and spot rates, rates involving full truckload shipments that do not recur, are starting to exceed contracted rates. Unfortunately, this means small and mid-sized shippers, which are already struggling to maintain profitability in logistics and shipping, will face additional struggle in attempting to procure full truckload capacity.
Decreasing capacity and increasing full truckload rates are expected to increase throughout 2018, reports Freight Waves. This is due to increased demand, stimulated by ongoing disaster recovery efforts, which could include an additional disaster relief package in the federal government and those of states affected by the past years severe hurricane season. Retailers affected by the year storms are still struggling to reopen, and when that occurs, capacity will shrink even further. As a result, spot rates will remain “super high.” Fortunately, a solution exists.
The Solution: Shippers Must Use Out-of-the-LTL-Box Strategies
Shippers must take a more strategic approach to truckload procurement, explains CH Robinson via Supply Chain 24/7. Economic and market activity show few signs of slipping, save for a minor tumble in economic prowess earlier in February. In the past, shippers may have ignored provider complaints, attempted to time the market to take full advantage of truckloads, and engaged in relatively minimal interactions involving full truckload procurement. This strategy is ineffective, and shippers must use out-of-the-LTL-box strategies, including:
- communicating fully and accurately details of shipments in need of full truckload transport.
- Benchmarking progress and use of all transportation modes.
- Conducting annual procurement exercises.
- Leveraging a web-based and constraint-based bidding tool, such as a transportation management system (TMS).
- Hiring outside experts to help manage both inbound and outbound freight, such as hiring a third-party logistics provider (3PL).
- Staying attentive to the market.
- Varying available full truckload carriers, but retaining a smaller set of frequently used carriers and drivers.
The final aspect of the solution can be difficult to grasp. If a shipper wants to very available carriers and drivers, how does it also focus on working with a specific set of carriers instead? The answer lies in outsourcing the process to procure full truckload shipping availability and capacity, and depending on the 3PL chosen, outsourcing may also include the use of the outsourced, software-as-a-service (SaaS) platform as a TMS, such as the Cerasis Rater. In fact, working with an outside entity is integral to accessing much of available capacity when trying to procure full truckload shipping. As explained by Chris Brady, 89 percent of carriers have fewer than five trucks, so expanding the number of carriers and drivers a shipper works with is tantamount to accessing 89 percent of available capacity.
The Reward: Procuring Full Truckload Frees Capital for Other Uses
In today’s market, customer service is everything. Customers will not hesitate to abandon purchases in favor of better costs and shipping options from a competitor, and shippers must have the capital available to help ensure E-commerce visitors and potential buyers make the conversion to purchase. In other words, shippers need to have the capital available to market their products correctly. As explained by Jim Joseph of Entrepreneur.com, content marketing is integral to every brand seeking to build better relationships with customers.
Depending on the type of product sold, content marketing can range from publishing a steady stream of blog posts to keeping Instagram and Facebook followers engaged with hourly, if not more frequent, updates. By lowering freight spend and learning how to procure full truckload capacity, shippers can effectively divert capital from logistics to marketing. In turn, more marketing will enable continuous growth, creating a self-propagating cycle.
Free capital can also be used for any number of other reasons, like product research, testing, development and more.
The Big Picture
Figuring out how to procure full truckload capacity is no small task. From Amazon to local truck drivers, the full truckload capacity crunch is about to reach epic proportions. Furthermore, both UPS and FedEx have announced plans to leverage the Tax Cuts and Jobs Act to increase capacity in the coming months, reports Global Trade, but as two of the big three carriers, capacity for small and mid-size shippers is still likely to result in a crunch. Getting a handle over freight spend through access to more truckload capacity is the ultimate win-win for retailers seeking to stay competitive with the big-box retailers and Amazon.
Up next, since more shippers will be looking to create a mix of over the road mode use, the next blog will focus on how to manage such combinations proactively.