Prior to the Covid pandemic, less than 50% of the population had any knowledge regarding supply chain issues.
Today, over 90% are aware of supply chain issues and the impacts they have on our everyday lives.
There continues to be significant congestion of ships and an overwhelming shortage of container equipment in addition to staffing problems at the ports. In order to abate anxiety among the general public, container vessels must now anchor at least 50 miles from the Ports of LA and Long Beach until they are called in for offloading. Out of sight, out of mind. Although unpredictable, capacity and supply will eventually return, which will cause rates to level off somewhat.
Shippers who negotiated contracts early in 2021 will experience the highest rate increases in 2022. Early negotiation created a buffer for the price increases that developed throughout the year. Those shippers may experience rate increases as high as 20%.
While all shippers are interested in transit time, the primary concerns are occurring at the point of origin. It is vital for shippers to get products off their docks, opening floor space and providing the opportunity to invoice their customers. Transit time has become a secondary concern. Unfortunately, we will continue to experience a degradation of service throughout 2022.
It’s nearly impossible to have a lean operation without a predictable supply chain. Shippers must reassess what they consider to be safe inventory levels to meet production goals and may be forced to consider additional warehousing when necessary. Lean and just in time (JIT) inventories must be closely monitored and risk assessments should be performed regularly when permitting vendors to maintain stock.
Carriers have been working around the clock to keep up with the influx of freight. It all begins and ends with drivers. Both shippers and carriers need to work together to make the truck driving profession more appealing. The current commercial truck driver market consists of 92% men and 8% women, with the average age around 49 years old. A campaign to lower the age requirement to 18 years old as well as add more women to the driver pool appears to be a necessity. Despite driver pay increasing by as much as 25%, attracting more drivers has continued to be a challenge. Carriers have also reported that many current drivers have opted to work shorter hours in response to their increases in pay.
Many carriers are transitioning to target pricing, which is essentially identifying “good freight” versus “bad freight”. For example: How easy are the customers to work with? Which shippers load and unload quickly? How far out of route do they have to travel to their next pickup? etc. The pricing carriers quote will reflect their assumption on what freight works and what freight does not work in their systems.
The overall cost of trucking will remain high considering the elevated costs they are facing. In addition to the rising costs of fuel, equipment and insurance, LTL carriers are forced to use outside TL carriers to supplement their linehaul service.
Keep an eye out for another potential Black Swan Event. The ILWU has threatened a strike in July. While in the past they were agreeable to automation, they are now opposed and that has become a major sticking point in contract negotiations
WHAT IS A SHIPPER TO DO?
- Become a strategic shipper.
- Limit the dwell time carriers experience on the docks.
- Make it as easy as possible for carriers to pick up and deliver.
- Turn containers and trailers around quickly.
- Provide a desirable environment for drivers.
- Share important information.
- Put yourself in the driver’s shoes with regard to your dock processes.
If you’re interested in improving your supply chain or reducing your freight costs… CALL WESTGATE GLOBAL LOGISTICS