[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”1/6″][/vc_column][vc_column width=”2/3″][vc_column_text]The recent downturn Concept began tracking last week has us focused on advising our customers and partners on the risks of chasing the lowest rates as they look as if they will continue to plummet.
Concept is keeping our finger on the pulse of what is going on in the spot market as well as with dedicated freight rates. Our data sources are showing that the three-week volume increase of 22.7% has been countered with a three week decrease of 32.2% as of 4/15. The volumes remain on the decline as the impact of the shutdowns continue to play out.[/vc_column_text][vc_empty_space][vc_single_image image=”1211″ img_size=”full” alignment=”center” qode_css_animation=””][vc_empty_space][vc_column_text]The volatility shown in the above Outbound Tender Volume Index is tilting scale in a scary direction because of the potentially long-term ramifications of driving carrier rates too far down. You don’t have to look hard to find LinkedIn videos, Podcasts, and FreightWaves coverage of rates being posted that we at Concept don’t want our name attached to.
We understand that we largely have to go with the market. We also understand that there is a cost to operate an asset-based trucking company and if rates continue to fall and stay low for a long period of time there are unintended consequences to following the market into the gutter.
The Truckstop.com and FTR’s Weekly Market Demand Index below shows the same mid-March demand spike and free fall that we are currently in. Typical to demand fluctuations, rates tend to follow a similar pattern just a few weeks behind the demand indicators. Thus, the second graph’s average rates will likely continue to decrease in next week’s market report.[/vc_column_text][vc_empty_space][vc_single_image image=”1212″ img_size=”full” qode_css_animation=””][vc_empty_space height=”15″][vc_single_image image=”1213″ img_size=”full” alignment=”center” qode_css_animation=””][vc_empty_space][vc_column_text]We will go on to further detail the dynamics that are leading to unprecedented times in the Transportation industry, but we don’t want our message to get lost in the data and our analysis of it.
Concept is working with our clients to ensure they understand the dangers of taking advantage of the high demand for their freight and chasing the instant gratification of saving $300-$1,600 on some loads. This especially pertains to regular shippers with dedicated lanes as they stand to do the most damage to their own supply chains.
As other industries and markets are shutdown, trucking companies are forced to offer their services in lanes and markets they don’t have as much experience in for cheap rates to keep the wheels turning and money coming in. It may be nice to pay $1,400 for a $2,000-$2,300 lane for the next few months but the regular carriers running those lanes for the previous rates are forced to find other freight where there is zero demand for their trucks.
Concept is working proactively with our carriers to adjust pricing. We also continue to advise our clients on the money we will be able to help them save over the next few months with their shipping. However, the disruption of losing some of the great carriers we’ve aligned to their most important inbound and outbound lanes can interrupt other aspects of their business. If your regular carriers are forced to find other freight, they will either find good freight to replace yours or they won’t find good freight and may have to face closing their doors.
On top of MAKING time to meet with your partners, here are some necessary questions you should be asking your Logistics Service Providers:
- How can I optimize my spend in this market?
- How will the optimization of my spend in this market affect my reliable carrier?
- How will this impact my long-term supply chain?
[/vc_column_text][vc_empty_space height=”15″][vc_column_text]When the recovery comes, demand for trucks will return slowly. Your regular and high-volume lanes will need good carriers, but they will be in very high demand for a long time. Three months of savings could result in more than a year of paying astronomical prices as asset-based companies rebuild and market confidence returns.
So far all our larger clients with whom we’ve spoken completely understand the importance of maintaining the Carrier relationships we have in place. They continue to trust us to deliver the right amount of savings through this time. We truly appreciate the trust and support of our great customers that are continuing to ship and even grow through this.[/vc_column_text][vc_empty_space][vc_row_inner row_type=”row” type=”full_width” text_align=”left” css_animation=””][vc_column_inner width=”1/2″][vc_single_image image=”1214″ img_size=”full” alignment=”center” qode_css_animation=””][/vc_column_inner][vc_column_inner width=”1/2″][vc_single_image image=”1215″ img_size=”full” alignment=”center” qode_css_animation=””][/vc_column_inner][/vc_row_inner][vc_empty_space][vc_column_text]The Truck Searching vs. Load Availability Index below shows how truck availability is growing as volumes decrease. The Load Searching vs. Load Availability index shows the converging dynamic of Carriers’ load searching increasing as there are fewer loads available. Carriers that live on the load board but fail to establish longstanding relationships with Shippers and Brokers who have consistent volume don’t make it long. Unfortunately, trucking companies go out of business significantly faster than they start back up to meet demand. In fact, we just came out of a nearly two-year capacity crunch where the rates were lower throughout 2019 than they were the previous two years.
All signs are pointing towards further decline in volumes and much more market volatility. We expect to see spot market rates sink to even more concerning levels, leading to many trucking companies going out of business. We have already seen a $3 Billion non asset-based Broker lay off hundreds of staff.
Despite the circumstances we maintain a positive outlook, confident we will adapt and grow through this. We continue to count our blessings as 88% of our customers deliver essential products. However, we did see a 28% drop in volume last week due largely to most of our customers being closed on good Friday. This week is on track to be about 10% lower than forecasted. With what we are hearing from other 3PLs we network and partner with, Concept is very fortunate to be running strong. We are still focused on helping more Shippers and Carriers navigate these crazy times.
In summary, one of the most impactful decisions right now is to MAKE TIME to meet with your Logistics Service Providers to ask these questions and have a plan in place. If you would like to schedule time with us, please feel free to e-mail Greg Finnerty, VP of Ops, at gfinnerty@conceptintl.com, or myself, Justin Smith, at jsmith@conceptintl.com. We are ready to help. We hope to hear from you.[/vc_column_text][/vc_column][vc_column width=”1/6″][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_empty_space height=”50px”][/vc_column][/vc_row]
