As you (and your customers) have likely realized by now, shipping rates have increased in recent weeks. An increase in demand has made it more difficult to find available trucks, which has created cost spikes we haven’t encountered since the onset of the 2018 U.S.-China trade war. Rates in California, for example, have risen roughly 200% year-over-year.
But why now? What’s changed since the beginning of the pandemic? And how long can we expect these capacity issues and ballooning rates to last?
Here’s what you need to know about what’s influencing the price of logistics and capacity so you can make the best decisions for your business during this crucial time.
Today, three trends are directly impacting capacity and rates.
In March, government-instituted stay-at-home mandates brought the global market to a halt. Then, as regions slowly lifted restrictions for manufacturing (especially in Asia and in Europe), the transportation industry was unable to move shipments quickly enough — which was only further compounded by a growing Driver shortage in the U.S.
Now, carriers are rushing to make up for lost time, doing their best to relieve congested ports and meet consumer demand as fast as possible. Demand for Drivers and trucks is reaching an all-time high, causing wait times to increase.
Although the pandemic has negatively impacted many Americans’ incomes, the partially closed economy and travel restrictions left others with a surplus in spending money. Many individuals have more to spend because they're opting not to take vacations, eat at restaurants or engage in other activities outside the home that might otherwise consume their monthly budgets. This means more people started holiday shopping earlier, are redecorating their homes and purchasing more from retailers in general.
When consumer spending increases, more loads need to be shipped. And when there are more loads to ship than trucks available to ship them, it creates scarcity — which drives up rates. We usually see this affect dry van shipping first, and then flatbed and heavy haul shipping further downstream.
Fast market changes and increasing customer demands mean shippers are requesting carriers to fulfill orders only hours in advance, not days. These just-in-time (JIT) shipments require Drivers and trucks to be positioned as close as possible to drop-off locations and remain on standby until they're ready to be moved, demanding higher price tags. It also means fewer trucks and Drivers are available, creating even more scarcity in everything from dry van to over-dimensional shipping.
In other words, the more JIT shipments customers need, the fewer Drivers and trucks available for other projects. And the fewer Drivers and trucks available, the more costly it becomes.
Much of what’s happening in the market is beyond your control as a shipper. Luckily, though, there are several proactive measures you can take to reduce negative impacts to your business:
Eventually, the market will stabilize, and supply and demand will level, bringing rates back to normal. But, until then, it’s essential you choose to work with carriers who understand the ebbs and flows during challenging times and can ensure the best possible experiences and coverage during peak demand times (and normal times, too).
For more than six decades, ATS has offered specialized transportation solutions worldwide. We’ve endured several global crises and know what it takes to find the right solutions for current needs — and we’re here to help get you through this unique peak season. Contact us today to earn more or reach out to request a quote.