Originally posted on K-Ratio

Trucking is a commodity and like any commodity, its price, though volatile and unpredictable, is still subject to the principles of supply and demand. In 20

20, these principles, and their derivative concepts, were stressed and stretched to their very limits but always held true. One would be hard pressed to find another calendar year containing as many economic cycles as the prior. Unfortunately, or perhaps fortunately depending on which business one is in, 2021 will likely pick up and continue right where 2020 left off. Despite the extreme seasonality typically found inside freight, markets do not stop or revert to normal conditions simply because we turn the page to a new set of days. Rather, all elements of seasonality and past historical trends should only exacerbate the extremes of supply, demand, and their intersection: price.

When a market or industry is disrupted, changes need to be made to help overcome the challenges that caused the disruption in the first place. Remember Blockbuster? They failed to overcome Netflix's new disruption of DVD-by-mail and died over night. Same goes for the supply chain. Everything about the supply chain is evolving right now. And if a company is unable, or unwilling, to join the evolution there will be massive ramifications. So what can a company do to evolve? 

As you’ve probably seen, tender volume and rejection rates climbed to new heights Thanksgiving week. Analysts recorded over 17,000 outbound tenders on the day before Thanksgiving. And post-Holiday generated over 12,700 tenders, which represents a whopping 49% increase year-over-year. “There’s a massive amount of volume out there, and reports show that online shopping is already up 22% from last year which means records will continue to be broken,” said Dean Corbolotti, Sleek Technologies VP of Managed Services.

Supply chain competitive advantage continues to be a popular buzz phrase amongst transportation and logistics professionals. Years ago, Amazon found their competitive footing when they promised select products would ship for free and arrive at the customer’s door within 2 days. Fast forward and Amazon now owns the e-tailer space as the largest ecommerce site in the world, using their supply chain as a strategic lever to outperform competitors- especially when it comes to the last mile. 

I ask this question to shippers a lot, and when I say a lot, I mean A LOT.  The top five answers are on the board:

• I don’t have a choice when I need to move a load.
• I’m not sure, I think someone has a relationship with them. It’s the way we’ve been doing it around here forever.
• They are part of my TMS and our tender process. 
• They provide good service

Transportation costs continue to rise making it difficult for shippers to effectively manage their transportation budgets. Did you know that the top 3 transportation metrics are related to carrier cost? They are: freight cost per unit shipped, outbound freight cost as a percentage of net sales, and inbound freight cost as a percentage of purchases. These carrier costs play a crucial role in total transportation spend. One of the quickest ways to reduce transportation spend is to select the most cost-efficient carriers. 

Once again, supply and demand have impacted truckload rates. Simply put, there are not enough drivers on the road to move US goods to designated destinations. The carrier shortage has been fueled by COVID, and new drug and alcohol testing protocols, leading to a capacity crunch. Capacity is the tightest it has been since 2018. Truckload pricing continues to grow, and some analysts believe shippers will experience rate hikes as high as fifteen percent in 2021. In order to attract more drivers, increased wages will be needed which will fuel higher truckload pricing.  

Seems there has always been a small undertone of mistrust within transportation and logistics. The year 2020, along with all of its challenges and uncertainty, has lifted trust to the foreground. For example, carriers have accused brokers-- whom they use to find and book loads-- of price gouging. Carriers are rejecting 1-4 loads nationally, disrupting contracted freight leaving many shippers wondering if long-term relationships are even worthwhile. Seems the days of accepting someone’s word is no longer enough. So what can be done to help close the gap, and build back trust? One important word comes to mind.... drum roll, please.... transparency! 

2020 has undoubtedly added disruption to the supply chain. Shippers across the US are scrambling to overcome the unexpected swing in truckload capacity and pricing. The traditional way of procuring freight transportation, through static annual contracts, is no longer best practice especially with market unknowns looming in the backdrop. “Shippers are struggling today. Contracted carriers are not meeting commitments because inked deals are no longer attractive,” said Mike Nervick, Sleek Technologies CEO. “The industry has seen an increase in carriers breaking contracts.”