In the past two months, we’ve seen the freight market transformed from a shipper’s market, which has held steady for the past two years, to a carrier’s market. Why? As states have started to lift COVID-19 restrictions and open back up, FourKites network data shows that shipping volumes across many industries have increased by about 2% per week, starting in early July, jumping as much as 8% in mid-July.
As shipper volumes remain high, the Outbound Tender Reject Index (OTRI), which measures carriers’ willingness to accept the loads that are tendered to them, has also been high for weeks, reaching 23% as of August 20, indicating a tight capacity market. Tight capacity is likely due to the imbalance in supply across certain regions, as well as the PPP loans that many carriers have received, which sidelined some trucking capacity.
At the same time, dwell times are declining – by over 14% in the last week domestically, and 12% globally – as shippers attempt to drive efficiency and avoid overwhelming the volatile market. A brief look at FourKites’ live Network Congestion Map illustrates reduced dwell times for the vast majority of the country, both for inbound and outbound freight. Much of the dwell time decrease can be attributed to better planning through the sales and operations (S&OP) processes to absorb the anticipated spikes in volumes that occur over the summer months.
Strategies for stability in a tight capacity market
As shippers continue to face headwinds from the COVID-19 pandemic and resulting economic uncertainty, many are struggling to find affordable and dependable capacity. According to FreightWaves, asset-based carriers are rejecting more freight than they have in years. Additionally, the average rate-per-mile continues to rise across dry van, reefer, and flatbed.
Despite the current conditions, shippers can take steps to reduce the imbalance in the capacity marketplace – among them streamlining their operations, implementing more rigorous capacity planning and appointment scheduling, and instituting a well-defined procurement and contracting strategy with their core carrier base. Shippers that haven’t implemented core carrier strategies are often seeing freight go to the spot market, which has been especially volatile during this period.
One of the most effective strategies we’ve seen is to set up round-trip opportunities with other shippers on complementary lanes to eliminate empty miles and increase service levels. This is exactly why FourKites built Lane Connect – to bring balance and efficiency to the capacity market and raise up the entire ecosystem of shippers and carriers.
Read on to learn steps you can take to identify and operationalize round-trip opportunities to beat the capacity crunch and keep your supply chain running smoothly.
Find Optimal Partners
Setting up collaborative round trips depends on the ability to identify partners. Many shippers wonder where to start; after all, you can’t simply call up other companies and ask about their shipping lanes. This is where the value of the Lane Connect network comes in. All companies utilizing the solution are seeking partners with whom they can establish round trips. Lane Connect also scores all potential partners based on the quality and amount of overlapping lanes, so you can quickly identify the optimal partners for your business.
Identify Complementary Lanes
After you’ve identified partners, the next step is to determine overlapping lanes to set up round trips. When looking for complementary lanes, shippers should consider a variety of lane-level data (in addition to origin and destination) for the best results. Factors like seasonality, deadhead and off-route distance can all impact the quality of the trip, and will be important to carriers when contracting the lane. Lane Connect takes all of these factors and more into account, and summarizes them into a lane score to easily identify the most promising lanes on which to establish a round trip.
Operationalize the Round Trip
Once an optimal lane has been identified, partners can then move into the contracting phase to operationalize the round trip. Engage with the carrier early and show how the trip has reduced deadhead miles and increased overall efficiency. During times of tight capacity, these round trips are highly attractive to carriers, and the efficiency of the lane helps free up capacity for the market.
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It’s anyone’s guess as to how long it will continue to be a carrier’s market. To mitigate the imbalance in the market, shippers should prioritize efficiency throughout their operations to reduce overall staring on the market, and invest in carrier relationships to ensure consistent service over the coming months.
To learn more about Lane Connect and the value of collaborative round trips, reach out to firstname.lastname@example.org or talk to your CSM to learn more.