5 Logistics Experts Weigh in on The Freight Crisis

2021-05-12 18:12:24 admin

5 Logistics Experts Weigh in on The Freight Crisis

Paper prices are increasing, leading to transportation and freight costs to skyrocket

Costs to make and ship products are going up. In our world, that means that paper prices are increasing. But that is not the only cost that impacts our products.

Transportation costs are going up. Way up.

From 2017 to today it is estimated that freight rates have increased on average over 8-15% in the US. To make matters worse, the number of available truck drivers is down.  The combination of these freight rate increases and lack of available drivers has put American companies in a tough position. We wanted to find out exactly how companies are dealing with these issues.

To get these answers, we went right to the logistical managers and even talked to people here at Smith Corona to see how they are handling this.

The companies that we talked to each had a different outlook on how companies should handle this increase and why this increase is happening.

Bill Cassidy

Bill Cassidy is the senior editor at JOC.com. His articles have been hitting this growing issue head-on. He has been to several conferences that have dealt with the increasing transportation costs and have talked to multiple logistics experts that were in attendance. Here is what he as to say.

As you know, freight rates have increased significantly over the past six months.  What changes, if any, should a company make to handle these increases? What are trucking companies doing to prepare their customers for these increases?

       Answer: Freight rates have increased significantly over the past six months, and as the year goes on they are going to continue to rise. Shippers should look for ways to work more closely with their carriers.  This collaboration can help reduce costs to your organization and make the carriers job easier too.

       Additionally, companies should start to examine their networks more closely when shipping freight. They should start looking at transit times to plan accordingly, as transit times are now longer than what they used to be. By planning ahead shippers can tell carriers when they are needed, which would help carriers find trucks for the deliveries. Planning ahead is key because truck availability is so low.

       Lack of adequate drivers has given freight companies that power to re-price their services. Consequently, shippers now have to accept their price increases because they have nowhere else to go. Before this increase, shippers would have had a variety of lower prices to choose from, but now pricing has increased, and availability has decreased, so there are limited choices.

In addition to price increases, there is a national shortage of available truck drivers.  If the shortage impacts a company’s raw material, how can a company manage their raw material inventory? What should be done to combat this?

      Answer: Companies should start to explore their sourcing options to help increase their potential raw material suppliers. They should be looking at multiple companies to source their materials from. If a company is sourcing from two or three companies, they should start sourcing from five or six different companies. They can also look at different ways to have raw materials shipped for example shipping LTL (less than truckload) instead of FTL (full truckload).

Should companies pass on the freight price increases to their customers?  Or should they eat the increase?

      Answer: No one in the industry was prepared for this spike. Budgets have been blown because of how unprepared companies were. The last thing companies want to do is raise prices on their products. So companies have been trying to eat the costs as much as they can. Transportation costs have increased so drastically that they cannot take the repercussions anymore.

Senior Editor at the Journal of Commerce Bill Cassidy weighs in on the freight crisis

Bill Cassidy
Senior Editor who covers trucking at The Journal of Commerce

JOC.com

Polly Gordon, Christine Manda & Leah Palnik

Polly, Christine, and Leah all work for PartnerShip. PartnerShip is a company that works with companies to help them with shipping and logistics. PartnerShip works with its companies to make shipping simple and affordable. Here is what they had to say about the increasing freight rates.

As you know, freight rates have increased significantly over the past six months.  What changes, if any, should a company make to handle these increases?

       Answer: Companies should start by evaluating their shipping needs. They need to be flexible with their delivery dates and warehouse hours. If shipments can be broken down into multiple loads companies can try shipping as LTL instead of FTL. Or sometimes companies should wait for a full truckload before shipping their products; companies need to evaluate options to see what is the most cost-effective to them.

In addition to price increases, there is a national shortage of available truck drivers.  If the shortage impacts a company’s raw material, how should a company manage it? What should be done to combat this?

      Answer: Companies should work with a quality freight broker in order to get quick access to capacity. Brokers typically work with a vast network of carriers and have the expertise needed to find a truck in a pinch. Inventory management is also extremely important right now. Companies should look at past raw materials orders and forecast what will be needed in the future. That way, they aren’t waiting until the last minute to order a new shipment.  

What is causing the price of transportation to increase and the shortage of truckers? Is it because demand is high?

       Answer: Many factors contribute to why transportation costs have been increasing. The shipping industry is experiencing a tight capacity market, which means there is strong freight demand, but a low supply of drivers and carriers.

       An important factor is the driver shortage. Long haul truck driving is not an attractive job. A driver is alone for long periods of time, and they are away from their families, which can be hard. We are seeing that drivers who are currently working for these carriers are beginning to retire because baby boomers made up most of the industry. New drivers aren’t entering the market at the same rate to replace those that have retired. For those young adults who are not attending college, interstate truck driving is not an option for them until they are 21; by this time those young adults would have started work in a different field. Truck driving also struggles to recruit women, who make up a large portion of the workforce.

       Powerful and damaging weather can also cause freight rates to spike. For example, the hurricanes this past fall took a toll on carriers’ networks due to massive road closures and hazardous conditions. In the aftermath, this weather tightened capacity further because trucks were being sent to the affected areas as part of the recovery efforts.

       Lastly, the ELD (electronic logging device) mandate is affecting how long shipments are taking. If a shipment was taking one day now, it may be taking two days because drivers can only drive a certain amount of time and they can no longer manipulate their hours.

Partnership Truckload Broker Manager Polly Gordon weighs in on the increasing freight rates

Polly Gordon
Truckload Broker Manager at PartnerShip

Partnership Freight Brokerage Sales Manager Christine Manda comments on freight rates

Christine Manda
Freight Brokerage Sales Manager at PartnerShip

Marketing Manager at Partnership Leah Palnik answers questions about freight rates

Leah Palnik
Marketing Manager at PartnerShip

Matt Dziak

Matt Dziak works for FR8Star. FR8Star is a company that works with carriers directly to give them opportunities to expand their companies. By doing this, shippers can save time and money by booking freight with them. Matt has a lot of knowledge on the transportation business and has given us some insight on what he thinks about the freight rates.

What is causing the price of transportation to increase?

      Answer: Factors that are affecting the freight rates are: “demand, locations (lanes), fuel costs, inflation, weather, and available truck capacity.”

       Diesel prices have been increasing and are currently at their highest mark. “Over the last two years, the diesel prices have increased by about 66%, making it more costly to transport freight.”

       With the new ELD (electronic logging device) regulations, they are restricting the number of hours a trucker can drive. Truckers can only drive a maximum of  10 hours a day. The ELD tracks these hours and they cannot be manipulated. With that being said, shippers should emphasize the importance to decrease wait times at shipping and receiving facilities.