By Matt Harding | Vice President, Freight Market Intelligence Consortiums | Chainalytics and Kevin M. Zweier | Vice President, Transportation Practice | Chainalytics
U.S. carrier fleets represent roughly $350 billion in for-hire truckload capacity and there are currently significant headwinds on the demand side of the equation. Shippers are openly stating that there is an abundance of carrier capacity and we are seeing the same in sourcing events we are conducting for our clients. In addition, we know through our Freight Market Intelligence Consortium (FMIC) that our qualitative surveys and data indicated a very weak market.
The most common focal point among shippers in a soft market is the next sourcing event. Relatively soft markets lead to entirely different negotiating environments and shippers generally have a choice to re-align their network and lock in capacity or seek discounts given market conditions. The smart shipper will take the time to evaluate how to improve their routing guide, secure capacity before the next capacity crunch, and maintain a good cost position as well.
However, it is also a good time to look at the bigger picture. In any organization there are a number of projects that are highlighted as strategic and as such have a bigger impact on people, processes or technology. Given the current state of truckload capacity, the timing for transformation and strategic change is now. Carriers are very open to new flows and new business opportunities. Additionally, given the amount of fungible capacity in the current market, risks associated with change and a new network structure are minimized.
Through our FMIC and collective experience across our supply chain competencies, Chainalytics has seen transportation organizations that continually invest in, develop and refine their strategic transportation plans win out in the long run over those who just opportunistically bid when rates are low. Simply seeking quick cost savings without balance and sustainability inevitably provides short term gains that can backfire, resulting in future rate increases or loss of capacity as capacity shifts to a “better yield relationship” that is equitable for all parties.
Yes, now is a good time to go to bid. Moreover, now is also a good time to develop the transportation network of the future. Consider refining your long-term transportation needs, whether via the adopting new technology, creating cross docks, pooling, blending business units onto one technology or assessing dedicated fleet services – the market is in your favor and change is much less risky when capacity is soft.
Matt Harding, is Vice President of Chainalytic’s Freight Market Intelligence Consortiums and Kevin Zweier is Vice President of Transportation at Chainalytics.
