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In the fast lane: May logistics and supply chain news update

A quick synopsis of what we are reading in shipping, transportation, and business news this week


I hope you had a wonderful Memorial day weekend and were able to enjoy a shorter work week this week. It’s starting to get hot and humid here on the East Coast. Our office, close to the Philadelphia area, has experienced some wild weather and tornado sightings and warnings this week. Time to prepare for summer weather.

Here were the hot topics (no pun intended there) of the week in the news:

7 Days

FedEx Ground Announced Seven-Day Residential Delivery Year-round

The ecommerce buyers desire and demand for faster shipping had FedEx announcing this week that beginning in January 2020 FedEx Ground will be delivering seven days per week, year-round for the majority of the U.S. population.

“We have made significant investments in capacity, technology and automation at FedEx Ground over the past 20 years. These investments have allowed us to gain ground market share for 19 of the last 20 years, and we are now ideally positioned to extend that growth as the average daily volume for small parcels in the U.S. is expected to double by 2026,” said Raj Subramaniam, president and chief operating officer, FedEx Corp., in their press release. “Expanding our operations to include Sunday residential deliveries further increases our ability to meet the demands of e-commerce shippers and online shoppers.”

FedEx currently is a shipping carrier for 201 retailers in the Internet Retailer 2019 Top 1000 – while UPS is used by 274.


$2 trillion infrastructure package

“Status quo is failing” was the theme coming out of Washington D.C. and other host cities as 500 organizations participated in the 7th annual Infrastructure Week to call for a national infrastructure investment last week.

“Manufacturers are calling on Congress to act. Everything from our roads and bridges, ports and waterways, broadband and 5G technologies and more need a robust investment,” said Catie Kawchak, Director, Infrastructure, Innovation and Human Resources Policy at the NAM. “Across the country the message from Infrastructure Week is simple: The infrastructure choices we make today will shape America’s future.” – nam.org

“With a $2 trillion infrastructure package on the line, business leaders need to step up and fight for the common good in the form of public infrastructure spending — or suffer the consequences.” – Forbes


98.6%

The percentage of small American manufacturing companies that are struggling to hire

98.6% of American manufacturing companies are small businesses, struggling to hire.

“Manufacturing businesses drive the U.S. economy,” said SCORE CEO Ken Yancey. “They might be factories or bakeries, and they might utilize machine power or hand-make their products, but what they have in common is that the vast majority of manufacturers are small business owners.”

What does this mean? While robotics have been perceived to be a threat to manufacturing jobs – the more than 400,000 job openings further prove that humans are still needed in manufacturing. And as ABI Research conconcluded, technology will reinvent, not eliminate, manufacturing jobs. Employers will need to leverage new technologies and machine learning to continuously train their current employees.


June 1

Beware the Weather

With the Atlantic hurricane season officially starting June 1 and devastating storms and tornadoes already impacting lanes across the midwest – it’s a good reminder for companies to be looking ahead at possible delays and disruptions to their supply chains that summer weather could cause.


14 acts of kindness

What I’m reading this week

“Be kinder than is necessary. Everyone is fighting some kind of battle.”

Simple words, but a great reminder as you interact with peers and customers. 14 random ways to be kind at work (and why it matters) by Sarah Goff-Dupont gave some practical tips on ways you can show kindness to those around you. If you have a few minutes I would recommend it.


And I’ll leave you with this Gif of the week:

Any news you are reading this week? Let me know!

Have a great weekend,

– Hannah

P.S. I won’t admit to how long I watched that gif until I realized what was happening.

Guide to Ecommerce Shipping: Strategies and Tips to Consider for Your Business

In a dynamic and increasingly streamlined world, the online market for selling is growing like never before. Ecommerce is taking over the industry, as companies like Amazon, E-bay, Walmart, and Target attract buyers through immediate access, quick shipping, and customer convenience.

25% of adult Americans purchase an item online at least one a month (NPR/Marist 2018), and ecommerce sales made 10% of total U.S. retail sales in the third quarter of 2018. (U.S Census Bureau 2018). While these are by no means majority statistics, it is important to remember that online shopping was born just twenty-five years ago. In our consumer-based society, it has revolutionized shopping, and in the world of shipping and freight transportation, it has created a whole new division for transporting products to customers.

So, what does this mean for you and your company? The world of ecommerce shipping can be convoluted and confusing, creating unnecessary stress for you, the shipper. Getting a product from Point A to Point B seems simple enough, but the reality is, there are several things to consider from tendering and tracking to choosing an LTL shipping carrier.

LTL has become a more attractive option recently in part because providers have made major technology improvements to become more efficient, safer, and better equipped to handle shipper’s and customer’s needs. A large number of LTL providers have become problem solvers and utilize technology that allows for more flexibility and efficiency when shippers work with them.


Analyze Your Current Strategy

If you are already in the ecommerce shipping business, think about what you’re doing now. What’s working? What’s not? Where are you spending the most time and money? Are there problems there? How do your employees and customers feel about the current process? Understanding the key problems and areas for improvement are important for moving forward with your ecommerce shipping strategy.

Know Your Shipment

What types of products are you shipping, and what is the best way to send them? Assuming you are shipping via a Less Than Truckload (LTL) carrier (see below), different companies charge depending on size and weight, so be aware of space, weight, and shape your product(s) will occupy when it is packaged. Where is your product going? Do you ship internationally or just domestically? If you are shipping internationally, it is important to know the rules and regulations of borders and countries as well as the tariffs involved.

Know how to package your freight, and make sure it is packaged well to avoid damages. In the ecommerce world, your customer has most likely already paid for the good by the time you are shipping it, so it is important to take extra care in ensuring its safe transportation. Depending on the size of your shipment, you will need to decide what kind of shipment you are going to do. For larger freight orders, Truckload or Less Than Truckload carriers are typically used, but for small shipments, a parcel shipping service might be cheaper and more efficient.

Know the Right Shipping Terminology

When shipping, and everything else really, it’s important to know the details of what you’re talking about. You’re dealing with carrier companies that need to follow specific instructions to deliver your product, and you’re also dealing with products other people have purchased, so take extra care that they get where they are supposed to. Part of that involves knowing the correct terms in the shipping industry. Here are a few.

Bill of Lading – the Bill of Lading is a required document to move a freight shipment or a sort of contract between a freight carrier and a shipper. It is a detailed list of a shipment in the form of a receipt given by the carrier to the person consigning the goods.

Tariff Codes tariff codes are product-specific codes as documented in the Harmonized System maintained by the World Customs Organization.

Less Than Truckload – the transportation of freight that only occupies a portion of an entire trailer. Multiple shippers share space on the same truck only paying for their portion, making LTL a cost-efficient method of shipping freight.

Truckload – a mode of freight transportation for large shipments that typically occupy more than half or up to the full capacity of a 48’ or 53’ trailer.

Develop or Purchase a Management Software

This is a key factor to a stress-free shipping experience. Ecommerce shipping is unique in that you are dealing with different types of customers from all over the world all at the same time in a streamlined efficient manner. There are several options for transportation management software that will cater to your shipping needs and organize shipments, tendering, tracking, and other data you need to manage as a shipper. Imagine logging in to one software and having all your orders and data in the same place while being able to compare LTL carrier rates and choose the best one for each shipment. Integrated and seamless solutions make it easy for both you and your customer. 

Choose a Smart Shipping Strategy

In the age of Amazon Prime 2-day shipping, customers have grown accustomed to near immediate delivery of purchases, and as a result, they will pay significant fees to get their item(s) quickly. So, as appealing as it sounds, free shipping isn’t always best for attracting customers. Come up with a shipping price that works for where your company is now, whether that is a flat rate, pay per pound/mile, or free shipping. Just remember as a rule, people WILL pay to get their item faster so at least having the option is almost always a good idea.

Connect with Your Customer

While our world is increasingly digital, human connection is valued perhaps now more than ever. Customers want to be able to trust the people and companies they are buying goods and services from online, which is one of the many reasons artificial intelligence has not completely taken over the market. In the ecommerce world, it is critical to establish relationships with your customers, especially if you are choosing to sell independently, apart from the large conglomerate retailers mentioned above.

Implement some of these strategies and give yourself a high-five!

5 things to know about blockchain and its impact on logistics

In our consumer-based world, the supply chain is the network of all the people, activities, technology and resources involved in the making and selling of a product from its creation to its delivery to the user consumer. In short, it is the journey of the products that we consume, and in a society that is increasingly aware and interested in ethically sourced and produced products, the supply chain is more important than ever.

The blockchain is a recent technology that enables peer to peer transactions, dissolving the need for a trusted third party with its innovative technology of an infallible ledger. While its original use was for the cryptocurrency, Bitcoin, the blockchain is a potential catalyst for an entire societal shift, changing the way we do deals, make payments, and store data.

A blockchain could be used to track a product’s journey along the supply chain, ensuring that sellers and consumers are receiving the item they paid for. For food and other perishable items, it’s important to know where the product has been and how long it has been there. Blockchain allows a timestamped way of keeping track of goods as they are moved around the world. Every time a product switches hands, the change can be permanently documented on the blockchain.

In 2006, there was an E-Coli outbreak caused by spinach, and just last year there was a scare with romaine lettuce. Transparency in the food shipping industry removes the panic and the search to find the source of contaminated food, which in the case of the 2006 outbreak was just one lot from one supplier, and it put chaos on the food industry for 2 weeks.

The supply chain contains three main components: material flow, financial flow, and information flow. When the supply chain is long and complex, it is difficult to keep track of products and transactions, but the blockchain can organize information and finances in a way that is safe and streamlined, decreasing fraud, providing security, and removing added costs and inefficiency.

If a consumer or seller cares about ethically sourced and environmentally sound products, the blockchain allows them to see where their products are coming from and gives them the opportunity to do business with the companies that operate similarly to the way they do.

Unfortunately, there is a lot of corruption in our world, and in the supply chain, it can be difficult for all parties to trust one another in terms of quality goods and safety standards. Through the blockchain, smart contracts can provide accountability and security to suppliers, manufacturers, procurers, and shippers involved in the supply chain. They allow for if-then programming, meaning they can hold data or a payment until the terms of the contract are completed. Smart contracts are basically the use of the blockchain to make transactions with other people that are transparent, unchangeable and immediate, again removing the middleman of a lawyer or notary.

Because it is also nearly impossible for anyone to tamper the records of a blockchain, once data is entered, it cannot be deleted or changed, only added to. This is incredibly useful in the world of business where the integrity of transactions is what gives them value.  

The blockchain is also good for a globalized market, because through it, you can safely send funds anywhere without the use of a bank. Enabling peer to peer business, the blockchain has the ability to create a truly decentralized sharing economy, removing the need for the gate keepers, fact checkers and third parties that make up our society.

The blockchain and the supply chain have the potential to work together in a way that tremendously benefits shippers, consumers, sellers, manufacturers, and everyone involved in the making and distribution of a product. Because it is such a new technology, people are still learning and understanding costs and benefits of adopting it into their business model. Walmart is one of the companies to spearhead the movement, partnering with IBM to use a blockchain tracking their pork shipments from China.

While many people believe the blockchain to be useful and innovative, it will be a long time before it is the main technology of the supply chain. The next few years are bound to normalize the technology as more and more businesses and individuals use it, understand it, and share its benefits and handicaps.  

Blockchain Simplified

What you need to know about the technology


By now, almost everyone has heard of the blockchain, a concept popularized by the cryptocurrency, Bitcoin. But the blockchain as a model has the power to influence and transform society with its ability to create an unchangeable digital ledger of transactions, protected by encryption and distribution over hundreds of thousands of independent computers.

Imagine a document that you upload to Dropbox and share with say, 100 random people. Everyone you have shared the document downloads it immediately and stores it on their own computer. They now have timestamped “copies” of this digital document, and if you were to go back and change it, 100 other people have the original document to compare your changed one to. If someone wanted to hack into your computer and change the document, he would have to also hack the 100 other computers and change all of those too.

When an author finishes writing a manuscript to a book, she sends it to a publisher, who then copies it hundreds of thousands of times. It is now decentralized and, in a sense, unable to be changed because you have thousands of other copies to compare it to. No one dreams of changing The Bible or Harry Potter, because millions of copies exist worldwide, and no one is going to accept your modified version. This is the beauty of the blockchain.

In the world of digital transactions and contracts, the blockchain removes the need for a middleman, such as a bank or a contractor. You don’t need a third party to participate in your deal because once the transaction is complete, it’s done. You cannot double-spend, change a contract or forge because the transaction is set in stone and irreversibly documented on the blockchain. There are less risks because the sensitive data is not being held in one place, and the blockchain uses encrypted technology called cryptography to store it.

Public key cryptography uses a pair of keys, one public and one private to transfer messages and data through the blockchain. Anyone can see or use someone’s public key to encrypt a message, but once it is encrypted, only the person holding the private key is able to decrypt it. If Joe wants to send an encrypted message to Alice, he would use Alice’s public key to encrypt his message. If someone were to see that message, all they would see is seemingly random numbers and letters. Once Alice has received the encrypted message, she uses her private key to decrypt it.

Remember the 100 people you shared your Dropbox file with earlier? In the world of the blockchain, those people are called miners or nodes. The blockchain can only be updated by total consensus of these nodes, and once new data is added, it can never be erased.

If the blockchain is like an infallible history book, recording everything that happens as it occurs, the nodes are the fact-checkers, interested in preserving the integrity of the chain for their own gain. The nodes solve extremely difficult puzzles on the blockchain network and as a result, have a chance at winning Bitcoin, which is worth nearly 9000x one US Dollar.  It is a tradeoff that works because of the value of Bitcoin and the extreme amount of electricity and space required by these computers completing the puzzles, which are proof-of-work algorithms that keep the blockchain network running.

So what does all this mean? The US Dollar is no longer backed by gold, which means our paper money is only valuable because we as a society believe it to be valuable and rely on it. In online banking, the number in your account is literally just a number that you or your bank cannot change without fulfilling specific conditions, such as a purchase on your debit card, a withdrawal, or an overdraft on your account. Our currency is all about authenticity and the meaning we give it, so the same is true for the blockchain and cryptocurrency.

Contracts, online payments, checks, birth certificates, and cryptocurrency are all valuable because of the confirmation of their authenticity. Without that affirmation, any of these things could be forged and ultimately worthless. The blockchain eliminates the ability for forgery in its infallible record of transactions and data.

Whatever the future of the blockchain, its concept is revolutionary. Whether it will transform society in the way many people believe remains to be seen, and in order for that to happen, our entire society would have to be turned upside down, removing the trust we put in central banks, the federal reserve, third party contractors and the government, replacing that trust with faith in the blockchain.

Your Guide to LTL Freight

The basics of what LTL freight is

Less than truckload (LTL) freight is usually classified as shipments that weigh between 150 and 20,000 lbs. or when freight won’t fill an entire trailer. Simplified, LTL is usually perfect if your shipment is too big for parcel, but would waste space taking up an entire truckload. With LTL you only pay for space in the truck your freight is taking up and this is why you often can save significantly on the cost of shipping your freight.

In the past, the majority of LTL freight was predominantly in the industrial and manufacturing industry, but recently other industries — especially eCommerce and retail — have realized the benefits of utilizing this mode.

“Retail has become a bigger percentage [of LTL shipping] in the last five years. A lot of retail was truckload freight. . . now it’s become LTL” said Satish Jindel, president of a transportation research firm. This is because shippers are realizing that LTL can be a cost-efficient and flexible option that can meet their needs.

The benefits of using LTL Freight

LTL has become a more attractive option recently in part because providers have made major technology improvements to become more efficient, safer, and better equipped to handle shipper’s and customer’s needs. A large number of LTL providers have become problem solvers and utilize technology that allows for more flexibility and efficiency when shippers work with them.

For shippers, choosing LTL can lead to significant financial savings, reduce your carbon footprint, and achieve faster door-to-door delivery. Another benefit of LTL is the multiple service and capability options LTL carriers include like expedited services, lift gates, inside pickup and delivery, hazmat, volume LTL, and consolidation.

An example of LTL carriers making changes to improve service include A. Duie Pyle. Randy Swart, chief operating officer at A. Duie Pyle explained their offerings to meet the demands for smaller shippers in a Inbound Logistics article: “We have added a substantial number of smaller trucks to our fleet with lift gates to handle the increase in smaller shipments to customers without docks and in more congested areas. As a regional carrier, our freight does not go through any breakbulk facilities; it goes directly from the pickup service center to the delivery center, which reduces time and handlings. It also allows us to select the proper vehicle for the shipment size and delivery area because of our service density in the region.”

Getting started shipping LTL

When it comes down to booking a shipment with a software service, like a TMS, you’ll have multiple rates to choose between. The two main variables to look at when comparing rates and carriers are time and money.

  1. Transit time. How fast will your shipment get there is usually a key part of picking a carrier. Regional and multi-regional carriers will often have much better transit times and prices for your regional shipments. National LTL carriers will have better rates for long-haul lanes. Understanding and having multiple carrier relationships with both regional and national carriers will give you options and the ability to easily compare geographical differences in cost and time.
  2. Pricing Factors. Of course, price is always a major factor when comparing and choosing a carrier. Many shippers don’t utilize LTL enough because pricing and contracts can involve a ton of nuances. But while LTL can seem more complex than other mode options, you can ensure you get better pricing by understanding these key factors:
    • Base rates & percentage discounts: When establishing LTL carrier relationships, the carrier will provide you base rates and then discounts off of those rates. Each carrier’s base rates and discounts vary so you’ll ultimately want to compare what is your net price. For instance, Carrier A could give you a 70% discount but could be more expensive than Carrier B who gave you a 50% discount, because Carrier A’s base rates are more. By compare the net price, you’ll have a better picture of what you’ll actually be paying.
    • Absolute Minimum Charges (AMC): The AMC is the minimum cost a carrier will charge and is often not met until the shipment exceeds a certain weight – usually 250 lbs. This plays a part of freight classifications which we will cover next. Overall remember AMC is why shipping LTL is usually for freight that weighs more than 250lbs.
    • Freight class: There are 18 different freight classes ranging from 50 to 500. The 18 classes are based on the density, value, stowability, handling and liability of the product. The classes are determined by the National Motor Freight Classification (NMFC). As the class increases from 50 to 500, the cost per hundred weight also increases to accommodate the more challenging freight products. Class 50 is a low class and describes very dense freight (heavy and compact) that is difficult to damage and easy to handle. A pallet of bricks for example would be class 50. Lower classes have lower freight rates. Higher classes represent lighter and less dense freight that take up more space and is more likely to be damaged. Examples of class 500 would be ping-pong balls. Higher classes will have higher freight rates. Always avoid guessing your freight class. If you guess or estimate incorrectly the shipment will have a steep reclassification charge added when it’s reweighed by the carrier.
    • FAK: FAK (Freight all Kinds) is a pricing mechanism that groups multiple classes of freight into a single class. Savvy shippers negotiate FAK provisions that allow shippers to ship their products that has multiple classes all under one freight classification. While FAK can be misidentified as just a means to cut costs, it is especially helpful for easier rating, and reduces re-classification and billing errors for companies that ship a wide range of products.
    • Accessorials: One of the reasons many eCommerce shippers are turning to LTL are the additional services LTL carriers provide. These include indoor delivery, residential delivery, lift gates, and more. But, there can be a catch, and that’s accessorial fees for those services. Ensure your TMS allows you to select any and all accessorials your shipment needs and then compare your rates. If you don’t add accessorials to your BOL, you could select a carrier and then later be hit with costs you weren’t prepared for. By comparing carriers with accessorials selected you’ll be able to accurately compare rates and won’t be later charged more than you were expecting.

Have a mix of regional and national LTL carrier relationships

Another factor of pricing is the distance the shipment is traveling. Regional carriers offer very competitive rates with faster delivery times within their specialized lanes. And if you are consistently shipping volume in a specific lane you can probably negotiate even better rates.

By establishing and having multiple carrier relationships with both regional and national carriers will give you more options and the ability to compare.

For reference here are the 2018 Quest for Quality Winners Regional LTL Carriers by Logistics Management:

For national and multi-regional carriers the 2018 Quest for Quality Winners were:

These are just a few of the carriers you can work with to find the best rates and transit times.


Double-check your documentation

With your shipment it is really important to get your bill of lading (BOL) information completely accurate. A BOL is legally binding document and serves as a receipt and contract between the shipper and the carrier. Provide the BOL to the carrier and attach a second copy to the freight with these details correctly filled out:

  • Full origin and destination addresses
  • Name and contact information of both the shipper and recipient
  • Product description of goods
  • Total weight and dimensions of the shipment (when measuring round up to nearest inch)
  • Total number of items
  • Packaging type (pallets, crates, drums, and/or cartons)
  • Freight class
  • Any accessorials and services (this will prevent any surprise fees)
  • Special handling instructions
  • If applicable hazmat indicated (you can learn more about shipping hazmat with the transportation.gov guide)

With Propel’s software solution your BOL is automatically created when you set up your shipment. By creating and storing the BOL with the shipment details you can always access it again within our system at any time. This ensures you aren’t missing any required information and enhances your business efficiencies by keeping your documents online and always easy to find. No more need for filing cabinets!


In conclusion

Although LTL shipping is especially advantageous for small businesses looking for savings. Recent trends of Amazon and other big companies have shown that there is room for more companies to take advantage of LTL for eCommerce, retail, and home delivery shipments. When incorporated effectively into a shipping strategy, LTL can help you meet your customer’s expectations and achieve your business goals for shipping.


Demand Forecasting: minimizing risk and maximizing your customers

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As part of a larger series, we have been examining the challenges and opportunities that the supply chain faces in 2019. In our first article, we focused on a challenge, specifically how to make sure your supply chain is secure in a complex technological environment. Today we will focus on an opportunity: Demand Forecasting. Since the supply chain is smarter and the consumer data is readily available, demand forecasting has become a must have feature in 2019.

Defining Demand Forecasting

Before looking at how demand forecasting can affect your supply chain, we need to understand what forecasting is. Forecasting is a product of predictive analytics based on past data and trends. These analytics should drive all your company’s decisions in the short-term and long-term. The goal of forecasting is not to be 100% accurate. It is rather an attempt to minimize risk for your business. Demand forecasting focuses specifically on the supply chain. An algorithm is built to predict consumer demand for goods and services.

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Forecasting is a product of predictive
analytics based on past data and trends.

These algorithms use data mining and past customer history to predict how much product you will need and where you will need it. A lot of times, a company’s success can be determined by having the right amount of stock on hand to meet the demand of the consumer. One thing to remember about demand forecasting is that is not accurate 100% of the time. Other companies have lost millions of dollars due to botched analytics. It is imperative that you keep your algorithms and data current and constantly forecast multiple data trends to get the best overall picture.

Benefits of Demand Forecasting

As the customer mindset changes, so must the supply chain. Customers today are used to very specific product orders, and they are used to receiving them very quickly. When products are out of stock, that can mean loss of business. Because the business scene is so competitive, customer retention is a huge priority. When your company uses demand forecasting correctly, it ensures that the product your customer is looking for will be there at a fair price. This will lead to higher customer satisfaction and repeat business. Having this level of forecasting will also increase your customer service interactions. The more information that your customer service representatives have, the more they can promise and engage with the customer. 

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When your company uses demand forecasting correctly, it ensures that the product your customer is looking for will be there at a fair price.

Another issue that can arise is too much stock. When demand forecasting is ignored, companies can over-produce a product, leading to a loss in profits. Demand forecasting can help predict the optimum level of product different warehouses should always be carrying. Also, correct forecasting can lead to a decrease in the necessary safety stock. This enables your company to have more mobility as you won’t be left with tons of left-over product when trying to push out something new.

When used correctly, demand forecasting has your products in the right place at the right time. This reality enables your company to have a price advantage over other competitors. When your company delivers on time and with a competitive price, your relationship with suppliers is solidified. Because of the visibility and transparency of your forecasting, suppliers will know they are getting the best price and an on-time guarantee.

Getting Algorithmic

Demand forecasting can be an intimidating endeavor. But with the growing complexity of the supply chain in 2019, it is a necessary endeavor. You don’t have to start forecasting with some expensive software either. A simple Excel spreadsheet could start you down the path to better business practices. Pay attention to the changes in the industry and forecast accordingly. As Dr. Muddassir Ahmed of Supply Chain Digital said, “Master the present before trying to predict the future.”

Rising freight costs: A tale of a driver shortage and increased demand.

Supply chain leaders face the same dilemma: freight costs are squeezing profits.

Rising freight spend

For the first several quarters last year there was a ground swell of leaders recognizing that transportation costs were becoming a major issue for their company. 148 companies in the S&P 500 mentioned “freight,” “shipping,” or “trucking” during their earnings calls in Q1 2018. This was twice the amount those terms were talked about from a year ago financial research platform Sentieo found.

The rising costs was a compounded issue of quickening economic growth, driver shortage, fear of trade wars and new tariffs, reduced capacity and higher volumes, and fuel prices driving up spot rates.

Spot Rates

In August 2018, spot truck rates had increased 20% from a year previous to an average of $2.14 per mile, the highest average on record for the month.

Volume

Freight shipment volume by all modes of transportation surged 10.2% in April 2018 compared to April a year ago, according to the Cass Freight Index.

Price Hikes

From January to July long-distance truckload prices increased at a 7.8% rate compared to 2017. LTL rates were up 7.4% and prices for the whole U.S. trucking industry were up 6.2%.

Capacity

“Industry capacity for truck drivers remains extremely tight. This is driving third-party hauling rates to record levels, up 26% versus prior year,” – Ralph Scozzafava, CEO of Dean Foods


6 Reasons why freight costs have risen:

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“The biggest companies in America face the same dilemma: A truck driver shortage is squeezing profits.” – CNN

Economic Growth
The current outlook for U.S. manufacturing growth points to the best output performance in more than a decade. Manufacturing growth is forecasted at 2.8% for 2018-2021. That’s good news for the economy, but means capacity will continue to be an issue during 2019.

Carrier Issues
Carrier bankruptcies and consolidations have reduced capacity, while demand has been increasing by almost 7% year over year, according to industry sources.

2018 U.S. E-commerce Sales
Through the first three quarters of 2018, online sales grew 15.5%, according to analysis of U.S. Commerce Dept. figures. On Black Friday alone in 2018 there was $6.2B in US online sales. Deloitte predicted e-commerce sales to reach $128 billion to $134 billion during the 2018 holiday season.

Increased Demand
At the beginning of 2018, according to online truck freight marketplace and industry analyst DAT Solutions, only one truck was available for every 12 loads that needed to be moved.

Driver Shortage
There is currently a driver shortage of roughly 50,000 drivers which is expected to grow rapidly to nearly 174,000 by 2024, according to the American Trucking Association (ATA). The trucking industry will need to bring on close to 1 million new drivers within the next 6 years to keep pace with the growing demand.

Total Truck Utilization
During early 2018, FTR’s measurement of Total Truck Utilization was 97% (meaning 97% of all trucks were in use) and at points hit 100%. During the first few months of 2019 however active truck utilization has fallen to about 94 percent, which is the lowest percentage since 2016.


These are just a few reason freight costs were such a big problem last years for shippers. Recent headlines, especially in the food sector, have shown 2018 costs are still impacting companies and are being passed along to consumers. While capacity has remained loose so far in early 2019, be prepared as we enter Spring for capacity to tighten and volume to increase again.