As truck rates drop, it is time to renegotiate with carriers!
The U.S. transportation industry is now relaxing after a few years of extremely high freight rates and less capacity. Retailers currently have an excessive amount of inventory, and customer demand has decreased. This is a result of inflation and increased spending on truck dispatching services. As a result, there is a weakening demand for truck capacity, and trucking rates are declining. Truckload spot market rates are 15% less expensive as the trucking rates are falling lower than they were a year ago and below contract costs.
Through the first quarter of 2023, we expect that trucking costs will either stay the same or go down even further. Our prediction, however, is not very certain though. There are many hurdles, including war, high inflation, full employment, and a newly elected Congress. But the market’s downturn will not continue indefinitely, for sure.
How can manufacturers gain from lower transportation costs in the future?
1. Long-haul carrier strategy
Cost can be your company’s main goal, but it should not be the only objective. Set the objectives and priorities of your business before concentrating on partnerships over transactions and value over money. Your supply chain risk will be reduced by the carriers. They offer dependable truck dispatching service, flexibility, and access to capacity.
Include brokers and carriers in your plan, allocating lanes according to the providers. An asset-based carrier is a suitable option for major corridors with consistent volume. A broker would be a better option because they give greater flexibility for the 80% of lanes that have 20% of the flow (and less of a need for consistent access to capacity and equipment). Adjust the ratio provided to brokers upward or downward as the market conditions change. Spot rates are less expensive than contract rates in the current market, so you will offer your brokers a bigger cut on the freight.
2. Every cargo is important
Less than truckload (LTL) rates increased to 5-6% this year. Examine your LTL expenses. Your company may surprise you with the amount of LTL it ships as shipments get smaller and more frequent. Look at the possibility of regional carriers covering some of your lanes at a less expensive rate than a national provider. In contrast to the truckload market, you might need to diversify your portfolio of carriers to save money on LTL transportation.
3. Procurement strategies must be timely.
Now that trucking rates have fallen, you might want to lock in savings by launching a freight request for quote (RFQ). Instead, form strategies that will be helpful in longer-term partnerships. Increase the volume or number of lanes available to your primary carriers in exchange for a price reduction. Reset quarterly rates, savings and the right strategies will be helpful.
We MetroMax Dispatch is one of the best dispatch services in North America. We specialize in scheduling loads that pay the most. We also support small transportation firms in growing their operations. Go through our list of services to learn more about us.