According to a Wall Street Journal report, prices for big rigs used most often are up 20+% over last year and long-term contract rates are anticipated to increase as much as 8% this year. What’s the deal with rising freight costs?
Due to the healthy economy, the trucking industry is experiencing extremely high volumes of freight—more, in fact, than they’re equipped to handle. Basic supply and demand explains the underlying reasons for these unprecedented rate hikes.
Problem #1: Driver Shortages
The U.S. is currently about 50,000 drivers short of what is needed to meet the increasing need. Because drivers are aging and retiring faster than truck driving training programs are turning out graduates, that number could more than triple in the next 5-6 years. (citation)
Problem #2: Truck Shortages
Trucks move 70% of the nation’s freight, and some estimates indicate that there are anywhere from 12-15 awaiting loads for every available truck. A new federal law, passed December 2017 and in effect April 2018, requiring truck drivers to electronically log their driving hours, forces trucks that don’t carry a device off the road. While some trucking companies are working to increase their fleet, the short supply of trucks certainly works in their favor to drive prices up.
With UPS teamsters threatening to strike if contract negotiations don't reach a favorable consensus by August 1, shippers could face even steeper prices come the end of summer if truck availability temporarily shrinks.
Forecasters don’t see the current trend changing anytime soon. So what, if anything, can you do to protect your business.
While supply and demand would indicate that you the shipper are on the losing side of rate negotiations, you actually have more control than you realize. Partnering with CMG gives you bigger bargaining power. But we also analyze your shipping processes and procedures to pinpoint additional cost savings. In some cases, our analysis has led us to recommend a company purchase and manage their own fleet, cutting out third party shipping companies altogether. This measure would have been considered extreme just a few years ago, but with freight costs expected only to rise, it may become a more viable option for more and more businesses. We can analyze your freight processes and existing contracts to make recommendations tailored to your needs so your product gets where it needs to go in the quickest, most cost-effective way possible.
Don’t let increased freight costs destroy your bottom line…or risk losing valuable customers. With no contracts ever, you can “insource” freight management with CMG with no risk or obligation. Contact us today to get started with a free snapshot. Our initial analysis will give you an idea of what CMG can do for you.
We are seeing trucking companies demanding increases with old and new clients. If the shippers are not ready to comply, they get dumped. Manufacturers will notice their average rates will be much higher when bidding out freight. What in the world? Is the economic climate is so bad, that the carriers need more money to survive?Read More
I have been in this industry for over a decade, while my colleagues and partners have been in it for over 30 years, bless their hearts. The one notion that has never changed is when I say the word “Freight,” or any variation, Senior Level Management says, “that’s not my department.” I have been in meetings where the Upper Management leaves, visibly upset because they believe what I am about to discuss has nothing to do with them. I’m going to share a quick story of the time I became unhinged during a meeting and why it matters:Read More
The holidays are upon us, and no doubt, we’ll see online shopping continue to increase year over year. As consumers trend toward buying online, shippers—particularly LTL and small parcel—will see an increased volume. The growing economy should be good news for your business, but if you’re not prepared for the rate changes, you could see freight charges eating into your profit margin.Read More