“This is a very unique market and the first time in recent history where the market favors the carrier,” said director of enterprise execution for Emerge, Conner Doran. “In the past, shippers have over-projected on volume to create a buffer in order to protect themselves and their demand fluctuations. Typically, this results in the carrier not realizing 100% of the awarded volume.”
Doran’s comments come as the trucking industry faces unpredictable rate negotiations in the current market, especially as shipper and carrier relationships are easily becoming more strained than ever around logistical aspects.
“Now, we have seen the market flip in favor of the carrier side,” Doran continued. “Carriers are removing some of that capacity that was originally allocated towards that award to play in the spot market.”
Now, skyrocketing demand and rates have been an expected characteristic of the market itself since 2020, especially with surging e-commerce activity, shortages, and bottlenecks all playing a part in the strain. Additionally, the abrupt and severe market changes at hand have led to unpredictable service capabilities, constantly-varying rates, delays, expensive spot transactions, and unsatisfied customers.
According to Doran, these major market inconsistencies are being worsened due to a lack of clarity or proper forecasting from a technological perspective, although other industry leaders expect the market to rebalance itself significantly by the middle of this year. This is probably due to the likelihood of companies beginning to finally recover from shortages brought about by the pandemic and as the transportation industry itself learns how to adequately adapt to the ever-changing habits of American consumers in a pandemic era.
Shippers are also beginning to avoid yearlong, less-than-ideal rates by aiming for quarterly or monthly bid cycles, which is likely to remain healthier for current carrier-shipper relationships as opposed to long-term rate negotiations. Still, such negotiations will continue to be strained over the next few months, with shippers not often wanting to accept the present-day, highly-inflated rates for the long term.
Senior full truckload analyst at Stanley Black & Decker noted that his company has indeed transitioned from yearly bids to monthly bids as it doesn’t see the need for yearly pricing commitments from carriers right now. During bid time, Jolles also noted that all parties should keep a close eye on all small details.
Still, carriers and shippers alike can act upon a variety of methods to keep relationships stable. According to Jolles, if both parties commit to solid service and transparency, and if carriers are sure to “ask questions, over-communicate, and meet performance requirements,” the relationship can remain strong and shippers can stay confident.
At their facilities, shippers should also make sure to prioritize improved driver experience, which should include avoiding high dwell times, allowing for shipper-of-choice behaviors, and working to improve overall operations. Wasting money and time through long dwell times can easily strain even the best of shipper and carrier relationships, noted manager of warehouse and transportation systems analytics at Hormel Foods, Tim Whitson.
Innovative technology should also be embraced by both carriers and shippers to keep relationships solid, as the new technologies making their way into the industry have been allowing for more transparent and smooth negotiations, accurate forecasting, and more reliable data aggregation so that all parties involved in a negotiation are seeing all aspects laid out thoroughly.
“Shippers talk about how they need to improve operations and dwell times at facilities,” explained Doran. “Utilizing technology such as the RFI feature and the Emerge Freight Procurement platform allows a shipper to ask these questions to their partners and consolidate all that information at the click of a mouse.”
Of course, communication is key, and this tech can boost partner communication in order to avoid mistakes and service issues that would hurt the relationship itself. If concerns and complaints can be relayed in real time, major issues can be prevented much more quickly and allow the shipping process to stay as efficient as possible.