Posted On August 28, 2018
The soaring rates shippers have paid quarter after quarter, year after year?
They are likely here to stay.
“Nobody has a crystal ball, but if I had to place a bet, I would say this is structural, not cyclical change,” said Lee Clair, managing partner at the consulting firm, Transportation and Logistics Advisors. Clair isn’t engaging in hyperbole. Dean Foods CEO Ralph Scozzafava says his company saw a 26% increase in truckload shipping costs during the second quarter of 2018 compared to the second quarter of 2017.
A 26% increase in just twelve months is significant, but, unfortunately, not uncommon. Rising rates have been the new normal for some time now, and that isn’t likely to change. The driving forces behind drastically increasing rates—worldwide economic growth, limited capacity, an ongoing shortage of truckers, and rising fuel costs—aren’t likely to go away. Even a slowdown in the growth rate would be welcome, but it still wouldn’t change the fundamental reality: It’s going to continue to cost more to move your products across the country and across the world.
So, what can your company do?
To begin with, you should view shipping costs from the 50,000-foot level. Rates for truckload (TL) and less-than-truckload (LTL) shipments are increasing, but they aren’t your only shipping expense. Labor, time, and other factors contribute to the cost of moving your goods from one place to the next. Implementing technology that allows your shipping department to do more with less is one way to help mitigate the financial pressure created by rising rates.
In other words, while you can’t influence macro-level trends like worker shortages and fuel costs, you can make your shipping department and supply chain more efficient through the use of technology.
Along with efficiency, you also need expertise. When rates are low, having an efficient supply chain is primarily a matter of customer service. In a low-rate environment, you need to deliver your products on time in order to meet customer expectations. In the current high-rate environment, your supply chain is still a core part of customer service—but an efficient supply chain is now about much more than delivering products on time.
In a high-rate environment, an efficient supply chain is also a matter of company survival.
Absorbing substantial rate increases could put your company out of business. However, passing the entire increase on to your customers—without first exploring how your company could save money through increased efficiency—could also do irreparable damage to the relationships that keep your company’s doors open.
Managing your supply chain in a way that keeps your company profitable without alienating customers is a challenge that would test even the most experienced, visionary internal supply chain executives. Because of that, you need a team of supply chain experts whose sole job is to help your company build the efficient, high-performing supply chain your company needs. You need a team of experts who know exactly how to mitigate, manage, and thrive in an era where truckload shipping rates increase by 26% (or more) in just one year.
The Flat World family of companies is that team of experts. Our companies—Flat World Supply Chain, Flat World Hospitality, Ram International, Ram Custom Crating, and Prologue Technology—work with shippers to develop a supply chain based on efficiency, visibility, customer service, and excellence.
We can’t completely eliminate the effect rising rates have on your company. We hold ourselves to a higher standard than just telling a shipper what they want to hear just to get their business. However, we can give you the tools, expertise, technology, and resources that will help you succeed in a high-rate environment.
And we look forward to working with you.