Lower Trucking Rates Are Possible. Here’s How: | Red Arrow Logistics Transportation and Freight Forwarding

Lower Trucking Rates Are Possible. Here’s How:

There’s no denying that the American trucking landscape is in turmoil. Transportation costs for U.S. businesses are up seven percent, year-over-year. What some were calling a “crisis” a few months ago has settled into a new normal, with higher rates and tighter capacity than anyone has experienced in decades. Along with rates, tensions between shippers and carriers are at an all-time high, with shippers angry at their skyrocketing freight costs, and carriers demanding better treatment or threatening to take their trucks elsewhere.

For some shippers, the plan seems to be to grudgingly ride out high rates until automated trucking arrives and slashes labor costs, but that technology is still years in the future. In the meantime, shippers who refuse to collaborate with carriers and update their operations will be the ones facing double-digit contract rate increases and struggling to find carriers willing to work with them. Instead of simply accepting the situation or passing the increased shipping costs to consumers, there are straightforward steps shippers can take to keep their rates under control and move shipments faster, more efficiently, and with a minimum of acrimony.

In the past year, the phrase “shipper of choice” has cropped up everywhere, as shippers try to figure out how to lock in capacity by appealing to carriers. The very notion is a striking turnaround from years past, yet many shippers still fail to understand that their loading dock procedures have the ability to dramatically speed up (or slow down) the entire supply chain. Some of the tips on being a shipper of choice are mere common courtesy, such as allowing overnight parking and minimizing detention times. But what carriers really look for in a valued customer comes down to visibility and communication. If you’re not already collecting data from your sites on key metrics such as detention times and load and unload times, it’s vital to start. Once you’ve accumulated data, share it. Offer carriers detailed freight forecasts, allow them to compare themselves against other carriers, and ask for constructive criticism on your own performance. Shippers often forget that drivers send their own feedback to carriers in real time, and it quickly becomes apparent which sites are responsible for poor treatment and long wait times. Visibility is a two-way street, after all.

A great deal of advice to both carriers and shippers advocates for end-to-end digitalization, but few businesses can afford to enact such a transformation overnight. Still, there are small ways to start the digitalization process that can yield significant benefits. Switching from paper to a digital bill of lading will cut down on transcription errors, speed up billing, and build a bedrock of data in order to start gleaning useful insights.  Even better, for LTL shipments, giving drivers advance knowledge of a load’s dimensions lets them utilize their space more efficiently.

Even changing how you package and palletize freight can increase capacity by reducing wasted space. It’s a small change, but working through the current crisis will require shippers to trim inefficiencies wherever they find them. According to JOC, “operational inefficiencies” are responsible for truckload carriers running 11 percent of all miles unloaded, and that’s an amount of waste the industry can no longer afford.

Weathering this period of high rates will require shippers to change not only their practices, but their attitudes. It’s unfair to “blame” carriers for making a profit after years of rock-bottom rates. Carriers are grappling with a host of regulatory burdens, the difficulties of recruiting and keeping drivers, and rising fuel costs. What’s more, the cost of maintaining a truck went up 6 percent in 2017, according to the American Transportation Research Institute.  As one carrier executive said in the Wall Street Journal, “We screamed from the mountaintop during all those years about how this isn’t sustainable and…it’s going to get ugly, and ugly is here.”

This ugliness is the predictable backlash from decades of shippers treating carriers as replaceable commodities, worth no more than their impact on the bottom line. That is a strategy that will no longer serve. Eventually, of course, the pendulum will swing back to center and rates will stabilize, either through automation, an influx of new drivers, or efficiencies unlocked by data. But the shippers who make it to that time without ballooning contract rates and chronic uncertainty will be the ones who work with carriers and brokers as colleagues, not adversaries.