What Can Be Derived From January's YoY Double-Digit Increase In Intermodel Rail Units?
By Sleek Technologies on February 9th, 2021
Wall Street Journal's Logistics Report stated that the Association of American Railroads recorded the highest ever volume of average weekly intermodal units carried by U.S. railroads in January. The number was 293,305 and represented a 12.1% increase year-over-year. So, why did this happen, and what can be assumed from the increase in intermodal rail volume?
We all know truckload capacity softens in January and February each year because of supply and demand. Knowing January experienced a double-digit increase in rail YoY, we can assume that truckload capacity is bouncing back slower than it typically would. Shippers are still experiencing higher than normal freight costs and tender rejection rates, so they are tapping into other modes to move goods.
We can also assume that shippers are trying to rebound from massive transportation budget overages in 2020. Freight spot rates sky-rocketed in Q3-Q4 2020. Shippers are now looking for ways to generate transportation saving
s to help recover. Some are willing to sacrifice service levels, like on-time delivery, to cut transportation costs by using less expensive modes. "One way to cut transportation costs upfront is to change your mode from truckload to rail," said Oleg Yanchyk Sleek Technologies CIO. "However, this impacts how fast goods arrive to the end destination. This strategy works for
rs who have excess inventory, but not for others who still require goods arrive on time as originally planned."
Either way, one thing is clear. It's become more difficult to manage a healthy balance between transportation/ logistics costs and service levels-- especially during market swings. Shippers need new options to effectively manage soft and tight freight markets to their advantage, not to the advantage of everyone else. In early 2020, shippers overpaid on contracted freight when Covid shut down plants across America. In late 2020, a large portion of freight shifted into spot because contacted carriers didn't hold their rates and commitments. Primary carriers, and brokers, seized the moment to increase freight rates to the highest they've ever been. New technology now makes it possible for shippers to add capacity while balancing freight cost and quality service levels throughout the year-- regardless of market conditions.
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