The first half of 2022 was a supply chain headache for businesses across the world. Whether it was inflation, rising fuel costs or port delays, small to mid-size businesses were hit particularly hard because many do not have the bandwidth or resources to mitigate the effects on their bottom line.
While shippers can expect to see more disruptions as we head into peak season, understanding market expectations can help better prepare them to mitigate risk in the transportation space. Here is what businesses can expect in Q3 across the different modes.
First Mile
As China has opened again, we are seeing an influx of containers entering the U.S. which is causing backups at some ports. This will tighten up domestic transportation as shippers look to move their product from port to porch all at once.
President Biden’s signing of the Ocean Shipping Reform Act of 2022 will help ease some of the unreasonable costs associated with drayage such as demurrage and detention charges in situations that are far out of the shipper’s control.
Middle Mile
Shippers can expect truckload capacity to loosen a bit in Q3 due to decreased demand and declining rates. On the flip side, though, with declining rates and carrier operating costs at almost record levels, we may see some carriers exit the market altogether, especially the smaller ones. This will add another bottleneck into the supply chain when demand begins to increase again and there are fewer carriers in the market.
In the LTL world, demand is still rising which could cause capacity constraints in Q3. Although we are seeing rising LTL costs plateau, they are still much higher compared to last year. LTL carriers are turning to the most profitable freight as demand continues to rise, so smaller shippers need to be prepared to adjust their strategies.
Final Mile
Finally! The Final Mile is perhaps the most talked about sector in the transportation landscape in recent years. The parcel duopoly is getting a lot more interesting as they begin to focus on the most profitable freight in their networks. The window is opening for shippers to diversify their carrier base. What a lot of smaller shippers do not realize is that there are a few different strategies that could make sense for them outside their current national strategy.
What Can I Do?
It is an important question that many businesses are struggling with. “What can I do to optimize my transportation strategy to drive efficiency and profitability within my company?” Here are a few things that can help you out.
- Set expectations upfront with customers and transportation partners. It seems simple, but it can be one of the most difficult things to stay on top of in your busy day. Communicating with customers and carriers about what they should expect upfront will create trust and save you the headache of issues afterwards.
- Stick to truckload contract pricing, if possible. Although spot prices are coming down, capacity in this market will be stretched thin at some point. Now is the time to lock in your contracted rates so you can secure capacity in the coming months.
- Consider alternate modes of transportation. While truckload rates are down, take advantage and try consolidating shipments or identify opportunities for a pool distribution strategy. When truckload rates are up, you may want to go the LTL or volume LTL route to mitigate costs.
- Expand your carrier base. There are two parts to this: 1) Expand your carrier base, and 2) choose the RIGHT carriers. There are hundreds of thousands of carriers out there, but not all are a good fit for your business. You will only truly experience the benefits of expanding your carrier base if you do it with the right carriers.
- Partner with a trusted 3PL. If you do not know where to start with the above points, partner with a trusted Third Party Logistics provider who will provide you with the technology, visibility and human expertise to put your business in the best possible position to flourish in the transportation space.
To read more, take a look at our full forecast here.
David Brosky
Transportation Insight – Director, Strategic Sales
- m) 313.268.2842
- e) dbrosky@t-insight.com
Transportation Insight Holding Company (TI Holding Company) is the parent company of industry leading 3PL logistics providers Transportation Insight (TI) and Nolan Transportation Group (NTG). TI Holding Company brings over two decades of multi-modal expertise and technology to the logistics industry and ranks amongst North America’s top 10 largest logistics companies. TI Holding Company services more than 14,000 shippers and over 80,000 carriers through its proprietary Beon™ digital logistics platform – a single point of access to TI and NTG’s mode-agnostic network and services. The TI Holding Company services and digital product portfolio spans across North America, offering domestic freight and parcel transportation solutions, warehousing, data intelligence, and supply chain consulting. For more information about TI Holding Company, visit www.TIholdco.com.
Photo by Josiah Farrow on Unsplash