Currently, shippers are in the driver’s seat as the freight market continues to soften, which means there are more trucks than shipments available to move. Morgan Stanley analysts recently stated a soft market will continue until 2H 2023 as inventory levels normalize– unless major disruption occurs before then. According to Oleg Yanchyk, Sleek Technologies CIO, “Balance could come sooner with typical seasonal spikes, like produce in Spring, and as smaller carriers park trucks due to tax and tag renewals which will create a tight market in a short period of time.” As freight market dynamics shift, shippers will need to evaluate truckload costs and carriers will need to evaluate truckload revenues to make sure it is aligned with current market conditions.
A Soft Freight Market Equals Lower Contracted Rates
During a soft freight market, locking in contracted rates [capacity] has long been a staple tactic for most large shippers. And it looks like 2023 will be a year where shippers take advantage of lower contracted rates as carriers do their best to hold onto stable volumes. All this said, contracted capacity is reliable now… but what happens when the market recovers? What happens when there are more shipments than trucks available? As the freight market tightens, carriers can demand higher truckload costs. Their attention and priority will pivot to higher-priced business to help recoup losses in revenue from lower contracted rates. The most difficult of lanes, facilities, or late-night/weekend runs will be most vulnerable to tender rejection, which means shippers need to be proactive with strong backup plans to avoid late deliveries.
How Freight Procurement Can Overcome Freight Market Fluctuation
Remaining static isn’t sustainable in a fluctuating market, such as freight logistics, where supply and demand do not come into equilibrium often– and where flips are inevitable. With unprecedented disruption, the market can swing at any time. Shippers need tools that empower agility and the ability to pivot as the market changes. With new innovative software that automates freight procurement, shippers can instantly find, vet, and transact with any trucking company across North America. Automating the critical freight procurement process will dynamically shift key variables, like price, so shippers always deliver goods on time while paying a fair market price [based on current freight market conditions].