By Gary York
Vice President, Global Sales, C.H. Robinson
Recognizing how much the U.S. trucking market can influence transportation budgets is one of the most critical steps to managing spend. Temperature-controlled shipments can be especially affected—both in price and service—as market forces shift across the truckload landscape.
Predicting the future for supply chains may be impossible, however certain industry trends can help us forecast and plan. Prepare for whatever 2019 has in store by understanding the major factors influencing today’s market.
High demand for fresh food and temperature controlled capacity
All industries utilizing cold supply chains currently show growth (e.g., pharmaceutical, frozen, and fresh food). Consumers want fresh food to support healthy lifestyles. A strong economy with low unemployment and increased disposable income helps them make these purchases. This demand for fresh leads to more pressure on temperature controlled capacity than ever.
Ongoing battle for capacity amid driver shortage
For the time being, increased truckload efficiencies and modal diversification strategies have helped capacity meet demand.
While many companies attempt to expand capacity through new trailer purchases and increasing pools, a driver shortage may hinder their efforts. Between high employment rates that provide attractive, high paying alternative jobs to trucking, and baby boomers looking to retire, the recent incremental growth of the truck driver pool is not enough to meet growing demand—causing a driver shortage.
Trucking companies are more selective in relationships
These industry pressures, combined with the fragmented nature of the for-hire truckload market, cause the trucking community to be more selective about the freight and customer relationships they seek.
The graphic below shows just how fragmented today’s truckload market is. One approach, working with carriers only in the right two segments—carriers with 400+ trucks—means a shipper is accessing less than 1% of available carriers.
With 61percent of trucks in the United States currently falling into the owner/operator category (including a large percentage of temperature controlled capacity), gaining and retaining relationships within this majority pool of carriers is critical.
But accessing this extensive amount of capacity also means managing dozens to hundreds of relationships. A time-consuming endeavor to be sure. This is where experts like C.H. Robinson come in. Large third-party logistics providers (3PLs) are able to provide expertise and aggregate many carrier relationships into a single, seamless experience—without risking the quality service temperature controlled shipments require.
Successful shippers will differentiate their business
How can shippers best position themselves for the coming market? Prepare for these supply and demand changes by deploying new strategies that effectively manage carrier relationships. These six tips can help differentiate supply chains in any market:
1. Keep rates current. An aged routing guide with outdated rates for the current market can cause unplanned swings in tender acceptance rates, higher increases during normal review times, or paying above market. All of these can negatively affect the total cost of goods sold.
2. Provide predictable volumes. Service providers appreciate predictability whenever possible. Awarding freight on a year over year basis—and sticking to promised volumes—can mean lower increases in rates.
3. Plan for origin and destination markets. In temperature controlled shipping, regional demand can quickly shift, which influences both price and capacity. Stay up to date about regional growing periods, weather, and other demand influencers.
4. Cut dwell time for drivers. Loading and unloading times matter. Drivers lose profitable drive time if they’re stuck loading/unloading too long. Cut lengthy load times to reduce high tender rejections.
5. Add lead time. Carriers plan/optimize operations weekly. Short lead times mean trucks may already be committed elsewhere. Research from MIT indicates that orders with lead time greater than two days have higher acceptance rates.
6. Build strategic relationships. Rather than working with a large portfolio of only asset-based transportation providers, shippers should build relationships with a strategic mix of asset-based and 3PL providers for best capacity coverage.
Changes in supply and demand will continue to drive marketplace dynamics. Keep up to date on these influencers and their potential impact with the Western Growers Transportation Program. This unique program provides Western Growers members with market insights along with best in class strategic supply chain support from C.H. Robinson.
We’re here to help
If you have any questions or would like additional information regarding the Western Growers Transportation Program, please contact Lauren Singh (831) 392-7061 (email@example.com).