It is quite possible that the market is moving towards a market correction. We know that trucking is cyclic; it is inevitable. We maintain that while we are heading into a major slowdown, there are ways to prepare your business for the storm. There is much money to be made by whipping the market into a frenzy and then cursing the fact that people behave irrationally. We're here to help you with this. Here are strategies that can help shippers, brokers and carriers deal with this changing marketplace. Let’s light a few candles, so to speak.
Strategies for shippers
Shippers should use this time to do extensive maintenance and repairs. We are seeing an increase in primary acceptance and standardization of ad hoc and contract composition. Shippers have an excellent opportunity to position themselves to protect their budget and on the eve of the July 4th holiday and in the lead-up to the July 4 vacation and, in the longer term, the fall retail peak.
Strategies for brokers
For brokers, this represents a period of short-term margin growth. Brokers who have been skillful enough to win RFPs in recent months will likely cover less freight than expected in the cash market. As the market declines, it will be crucial to track and ensure that the increase in gross profit per shipment offsets the reduction in revenue per shipment on one-time loads. As a bonus tip, it’s probably a good time to start bidding forward freight (RFPs) lower than the current market to ensure you have a healthy supply of contract freight heading into the fall.
Strategies for carriers
There is no way around that, the market is moving in a direction that will be difficult for carriers. Carriers need to focus on their spending in the lead-up to summer. With fuel prices still above $5 a gallon, carriers must find ways to reduce empty miles and keep the wheels moving underneath loaded trailers.
General rates are one side of rating freight markets. However, the nuances within the tracks, including sufficient capacity, regional and local carriers, multimodal options, and even intermodal transport, can contain additional savings. Businesses interested in taking a pragmatic approach should emphasize these nuances. These companies price shipments across the board, which also reduces releases. However, early bidding should be avoided in cases where market instability is minor. Of course, it is all about collecting the right data and understanding what it means for every movement.
Another strategy is to use tendering activities, especially mini-bids, to determine capacity, including tracks, routes, carriers, drivers and more, across the industry. The renewal of tenders should be worthwhile for all concerned and, in times of market instability, the key is to make mini-tenders more attractive to carriers. While it seems counter-productive to introduce mini-offers when carriers are in power, mini-offers can help secure more capacity by lowering the total rates for the guaranteed volume. As part of this, shippers need to avoid making too many promises, as this could set freight markets back and create more instability. Again, the freight market pendulum oscillates in a cycle of about 18 months of peaks and lulls. And recognizing that one-off mini-bids that benefit all parties to cargo management will enhance responsiveness and reduce transportation expenses. We hope that you found some useful information in this blog post.