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Agforce Vice President Andy Tuley’s 2019 Intermodal Outlook

Precision in an Imprecise Market

2018 was a big year for precision railroading, and that’s an understatement. Some might go so far to say it was a “make or break” year, and I would have to agree – as long as those people also agreed that by December 31, 2018, we could conclude precision railroading probably checked all the boxes on the “make” side of the equation. Of course, that growth did not necessarily come easy for any of us.

According to the Association of American Railroads, intermodal volume rose 5.5 percent in 2018 alone. At Agforce, we experienced that growth firsthand with our partners. By the end of the year, it had become clear that precision railroading is well positioned to go mainstream in 2019, but not without a few growing pains. Thanks in large part to a confluence of factors that included precision railroading and tight trucking capacity, CSX, for example, struggled with delays and the resultant frustrated shippers on the precision railroading side.

Thankfully, CSX adjusted to the “new normal” quickly, modifying and improving service to accommodate pared-down service routes and closed ramp facilities. The use of the word “quickly,” by the way, is highly relative. It did not take CSX long by railroad standards to make some high-impact, significant changes, but to our customers, it felt like an eternity. We were relieved in October 2018, when we started seeing glimmers of the positive angles of precision railroading strategy emerge not just for CSX, but for our intermodal partners as well.

Accept it: Precision Railroading is Here to Stay

The shifts and evolutions that came in 2018 created an intense need for not just data, but the best data and the best analytics to go with it. Agforce brought both last year and is prepared to do so again in the coming year.

Precision railroading can be difficult to deal with on the client side when a railroad first engages in this format. Done right, the strategy dramatically increases efficiency and optimizes use of assets across the board at a railroad, but the implementation period can be rough. CSX picked a rough time to implement precision railroading, in the middle of a tight truck market, since companies were already looking for options to get product off their docks and onto the road or, instead, the rails.

When engaged in successful precision railroading, a railroad like CSX may “shed” operations (including ramps and associated operations) while expanding profits all the while. This can complicate things for shippers to no small degree.

“CSX has more pricing power [now]…particularly in intermodal truck-rail business,” wrote WSJ business editor Paul Page this past October. Precision railroading provides more pricing power for the rails but also causes massive operational changes which makes having a solid strategic partner that much more imperative. The ensuing volatility certainly had a huge impact on our industry in 2018, but we expect things to calm down in the coming year.

What does this mean for Agforce customers? As precision railroading grows in popularity (and it will with results like CSX is posting), it will be imperative that every company have a highly optimized intermodal strategy. Whether you have had the same basic process for years and are in need of a “revamp” or you have only recently begun working with or considering intermodal shipping, rely on Agforce to help you develop and optimize the intermodal strategy right for you.

Rising Rates Likely to Slow in 2019

Fortunately for the entire industry, 2019 will probably not be quite as volatile as its predecessor. At Agforce, we do not expect the same volume of rate increases that we saw in 2018, which were caused by the coupling of a very tight truck market and the emergence of precision railroading as a dominant trend in railroading. Intermodal growth in 2018 was definitely fueled by tight capacity in the truck market, but now it is certainly here to stay.

The trucking industry appears to be taking a pause of its own as 2019 begins, another positive indicator for you that rates on this side could settle in the coming months. After a huge surge in fleet expansions, orders for heavy-duty trucks in North America were 43 percent lower in December 2018 than they were a year prior and down 24 percent month-over-month, ACT Research reported in early January.

However, ACT vice president Steve Tam observed, order volumes are not so low that the hot freight market could be heading for a downturn. “Freight demand is still growing. Freight demands are still increasing; it’s just that they are growing at a lower rate,” he told WSJ. This certainly correlates to our own outlook, with the caveat that this applies mainly to lanes that still “fit” railroads’ new operations. Be alert: precision railroading can create logistical issues if a railroad’s new ramp pairings do not fit with the network customers are used to. Agforce is dedicated to helping partners identify the best fits between providers and customers and also between rail and trucking providers as this evolution continues.

It is Time to Take a “Deep Dive” of Your Own

At Agforce, we have shifted historical business to rail in many cases due to pricing or capacity constraints. This service shift and the ability to meet demand has made rail a better fit for our customers in certain cases, and those instances are increasing in number as more railroads nail down precision railroading and the positive results it can bring.

It is imperative your logistics partner is doing constant, analytical due diligence for you. This is what Agforce does for its customers.

The good news is we don’t expect the spot market to stay up where it is right now. In fact, we’re predicting it will come down while contractual rates rise a modest 3-5 percent in lanes that continue to fit the railroads networks. Agforce continues to carefully and consistently monitor service provider, freight volumes, ramp pairings and schedules to help you optimize your shipping strategies. Untiring attention to detail in this will play a key role in your company’s successful shipping, regardless of mode or combination of transport methods, in 2019.

 

Together, we can leverage 2019 to your advantage. Let’s partner and create solutions for your business. Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.

 

Andy Tuley is the Vice President of Business Development at Agforce Transport Services. Tuley’s long history of work in the logistics and supply chain industry coupled with skills in freight, sales forecasting and P&L management uniquely qualify him to provide Agforce customers with the strategic industry analysis they need each quarter and in the event of industry disruption.

 

Case Study: Intermodal v. Boxcar

An Operations Manager’s Win

Meet Jerry

Our friend Jerry is the operations manager at a large beverage distribution company. He was frustrated and unsure of his department’s efficiency when we met. You see, the logistics behind the wine and spirits industry is nothing to sneeze at. Jerry was jumping through hoops (picture the kind with fire) to keep the beverages flowing, and to be honest, he didn’t know how long he could keep it up.

All Boxed In

Cash flow and inventory management. Those were Jerry’s biggest concerns. He was using a boxcar process that made Einstein’s Theory of Relativity seem like child’s play. Product was coming in from multiple suppliers, to be placed into a single boxcar, then being warehoused and loaded onto four different trucks for distribution. That’s a lot of loading and unloading — which meant a lot of unnecessary risk.

It also meant the challenge of ordering enough from suppliers to get that boxcar full, but not ordering so much that you can’t sell it, and Jerry’s company couldn’t sell that extra product. So, they did not meet this efficiency challenge and the costs were adding up.

That wasn’t the only expense. Low visibility of the supply chain and having to use a crystal ball to predict what might need to be ordered in 45 days meant Jerry’s availability was limited. His time was spent manually checking into the moving parts of the company’s sensitive supply chain. He couldn’t risk an unforeseen missed delivery appointment that could blow timelines. Both Jerry and his team were putting in unbudgeted overtime just to keep up.

Jerry knew if he didn’t get things on track fast, he and his team would burn out.

A Helping Hand

While Jerry was seeking solutions, he met Adam with Agforce. Jerry knew he wanted to partner with a company built on honesty that he could trust and, above all, they would meet his expectations (effectively lowering his stress level).

Before Jerry ever talked about his burdened supply chain, Adam asked him about what he found important. Jerry was tickled with the direct and forthright communication as their relationship developed. Confidence grew in Adam and the Agforce team. Commitment to truly serve him as a client was apparent in the knowledge Adam shared and interest he showed in Jerry’s personal success.

The Partnership and the Plan

Once Jerry and Adam finished their initial discovery, the Agforce team went to work designing a plan to simplify processes for Jerry. He was asking for the ability to feel good about the decisions he made so he could dive into other operational areas in need of attention.

To get him that level of confidence, we encouraged him to consider intermodal. With Jerry’s boxcar experience, it did not take long for him to be comfortable with the idea. The Agforce team proposed a new intermodal process that eliminated the need to fill an entire boxcar and nixed a warehouse stop. The plan also included broader cost savings than transportation alone. It would eliminate the need for excess inventory, in turn boosting cash flow and reducing the need to pay interest to the bank on net 30 terms.

Crisis Averted

Jerry took the proposed solution back to his team. With all stakeholders on board, he set to work with Adam to get the plan underway. He was pleased to find his new partners steadfast and true to their word. Implementation was an organized, smooth transition with world-class customer service supporting him through the entire process.

He was no longer frustrated and enjoyed compliments for seeking out a solution with a solid transport service.

Successful Partnership

The partnership between Jerry and Adam and the Agforce team freed up Jerry’s time:

  • Provided better visibility to freight
  • Allowed some inventory flexibility
  • Sured up capacity
  • Decreased lead time for ordering
  • Decreased transit time

It also eliminated long lead times and long transits. In time cash flow improved. The company’s overtime payout, to Jerry’s now incredibly efficient team, became almost non-existent. Jerry had saved his company’s bottom line and most days now resembled a walk in the park.

The Agforce team also celebrated the way they worked together. They had saved Jerry’s sanity, and did it in a manner that reminded them they work with the smartest people in the industry. Adam sure knows that without those hard working experts by his side every day, his friendship with Jerry may have faltered.

 

Curious where your company could you find efficiencies? Let’s partner and create your business’s solution. Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.

 

Cargo Theft: Is Your Freight at Risk?

A suspected crew of cargo thieves followed a truck from a local warehouse. The truck didn’t go far, parking just a couple of miles away. Detective Gerardo A. Pachuca of Los Angeles County Sheriff’s Department’s Cargo Criminal Apprehension Team (Cargo CATs) had the crew under surveillance. He reached out to the driver to let him know the thieves were tracking him — that shipment remained safe. The following week on the same route, and same parking lot, the trailer was left unattended. The thieves had their window. They took the entire trailer.

In the same article by Transport Topics, Pachuca warned about the sophistication level of cargo thieves. They are organized often working as a crew, where they stake out specific goods and their corresponding warehouses. Here’s what you should know.

Food and Beverage Freight is at the Highest Risk of Theft

The joint 2018 Semi-Annual Global Cargo Theft Intelligence and Advisory Report published by the TT Club, leading provider of insurance and related risk management services for the logistics industry, and BSI Supply Chain Services, leading global provider of supply chain intelligence, auditing services, audit and risk management compliance solutions and advisory services, revealed large growth in cargo theft and crime, reporting 24 percent of global cargo theft resulted from violent truck hijackings, with 27 percent of those incidents targeting food and beverage.

North American Cargo Theft Statistics

North America Cargo Theft
Credit: 2018 Semi-Annual Global Cargo Theft Intelligence and Advisory Report

  • 38 percent of thefts are by hijacking with theft of vehicle 25 percent
  • 82 percent of theft occurs in the truck modality compared to less than 7 percent by rail
  • Food and beverage are 34 percent of the stolen commodities, consumer products 18 percent
  • 66 percent of theft happens while cargo is in-transit and 11 percent while in warehouse
  • Mexico is top North American country for theft at 69 percent of all incidents, U.S. 22 percent

Cargo Theft Sophistication is Evolving

Scott Cornell leads Travelers Insurance transportation business and helped create its cargo theft investigation unit more than a decade ago. In this recent article, he talked through strategic cargo theft, which employs deceit and results in carriers and shippers unknowingly handing over their loads.

These thieves may pose as a carrier or broker, finding their target commodities and companies by matching them with the location of available cargo on public load boards. To steal the identity of legitimate carriers or brokers and bid on these loads, they may have posted fictitious loads where they can capture legitimate credentials during the bid process.

Friday afternoons, when companies are most pressured to get freight off the dock, may present the highest risk of falling victim to this strategy. The thieves hope the stress of getting the freight moving may lead to less scrutiny of credentials at pickup.

From double-brokering scams to all-out deception, shippers need to be cautious and aware. Cornell provided practices for shippers to help protect against strategic cargo theft including, “Work only with legitimate and licensed brokers that have strong controls in place for vetting carriers, ensuring their legitimacy and protecting cargo security.”

 

Are there additional safety procedures you should consider for your freight? Give us a call at 877.367.2324 or email us at inquiry@agforcets.com. We can talk about your current processes and identify risk. Let’s prevent cargo theft, together.

 

 

Freight Industry Update: Fourth Quarter 2018 & 2019 Market Outlook

The market still supports premium freight rates, based on tight capacity and high demand. Is this the new normal? How long will rates stay high? Let’s consider the current market and discuss possible shifts on the horizon as we round out fourth quarter and plan for 2019.

Freight Industry Right Now

As of October, freight industry executives still reported turning down record amounts of freight. However, the disparity between spot market rates and contract rates indicate we could see capacity and demand begin to balance. To understand what is happening currently, we also need to consider the national spot market rate though. Averages are a bit down in comparison to earlier in the year, but they are still up 20% annually. Experts do feel the market is stabilized for the remainder of fourth quarter and we could start to see some balance in capacity that extends into early 2019.

Note: Winter weather storms could impact capacity and rates, similar to Hurricanes Harvey and Irma, which caused a spike in spot market demand in 2017.

 

The Carrier Take on Freight Rates

Ask most carriers and they will tell you they have been on the short end of the stick when it comes to trucking rates for too long. Citing more than 10 years of profit margins around pennies on the dollar. They attribute the inability to reinvest in drivers and equipment to the lack of earnings. Many believe the higher rates are the new normal, and shippers should prepare their strategies with this in mind long term.

Some recent data points from DAT may not fully align with carrier thoughts. Van, flatbed and reefer average spot market rates were down in August. However, annually the average spot prices were still up per mile: van rates 35 cents; flatbed 46 cents; reefer 31 cents.

In a recent Logistics Management article, Mark Montague, DAT pricing analyst, reminds us that “demand peaks before rates peak, with rates tending to stay up, even as things start to cool off at times.”

Note: While there have been some dips, big picture spot market conditions support the rate increases we have seen for the last couple of years.

 

4th Quarter Rates

Present contract freight rates, fourth quarter 2018, were negotiated in late 2017 and early 2018, a time that was extremely favorable to carriers with capacity low and demand high. September 2018 found a wide disparity between the average spot rate and contract rates, with average spot rates favored by 23 cents per mile.

This could indicate an upcoming shift in the demand to capacity ratio. We may begin to see the freight industry balance for shippers. Tender turn-down by carriers have not been prevalent in recent weeks and there has been success in securing lanes for contract freight. If demand does indeed begin to indicate parity, spot market rates should only be a factor for one-off shipments and short-lived spikes in demand.

Note: Driver shortage still impacts rates due to the impact on capacity crunch, but the numbers are on the rise which could help to balance the market. The Bureau of Labor Statistics data shows driver numbers up by about 31,000.

 

2019 Freight Industry Outlook

The optimal state for the freight industry may very well be equality between supply and demand.
That balance seems like a thing of fairy tales. The winding path of the freight industry market is ongoing, impacted by carriers, shippers, consumers and the overall economy. It looks like 2019 will continue on the same curvy road. There are more than a few considerations as you prepare your strategy for the upcoming year:

  • Though trade wars are top of mind with the full impact uncertain, the strong economy looks as though it will hold.
  • There are strong indicators of freight rates continuing to rise. However the year-over-year percentage of increase should be below 2018 levels.
  • Carriers are investing in new equipment, based on the increase in sales of Class 8 trucks. This is not an indicator of more drivers necessarily, more an affirmation of trucking companies need of technology upgrades to meet regulations. Added bonus: Cutting-edge equipment is attractive to new drivers.
  • Consumers are driving changes in trucking industry operations. Shippers have shifted to more regional hubs in order to cut transit time. This has impacted the average haul distance — dropping nearly 300 miles per load since 2005.
  • Owner operators are banking on the spot market continuing to pay off. Many leaving small and large carriers to go out on their own.
  • The driver shortage is expected to remain at record levels but will taper off.
  • Capacity should loosen up just a bit with a possible double-digit percentage decrease in the volume of freight tendered.
Note: The American Trucking Associations’ Freight Forecast projected freight volumes to increase more than 35% by 2029.

 

What Can Shippers Do to Prepare?

With so much in flux that can impact you and your business’s profits, how should you navigate the freight industry peaks and valleys? Here are a few ideas:

1. Don’t forget the basics

The freight industry is cyclical, often hand-in-hand with the national stage, driven by one of the most basic economic principles: supply and demand. When we have a capacity shortage, the freight rates will negatively impact bottom lines.

2. Invest in analysis

You have your shipment data; compare it to what is happening in the market. This can help you formulate a picture that leads to a greater understanding of trends to inform your longer-term strategies.

3. Work with a 3PL

3PLs are in the best position for industry knowledge. They set pricing with both carriers and shippers. A good alliance will help you to ride the freight waves gracefully, helping your business to succeed in protecting its bottom line.

Together, we can simplify logistics. Let’s partner and create solutions for your business. Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.

 

Agforce: Delivering Positive Culture for Employees and Results for the Business

What does it take to rank as a best place to work in Kansas City? We can tell you. Named one of the 45 best places to work in KC by the Kansas City Business Journal (KCBJ), we’re sharing our secret: Make your people your most valuable asset.

A Best Places to Work designation is earned based on employee engagement and satisfaction. To measure, KCBJ administered a survey directly to our employees — a survey that played a large part in our Best Places to Work award. That means our “people first” mantra is more than corporate lip service. Our employees know they are valued, and truly champion us as a best place to work in Kansas City. The Best Places to Work program honors companies with employees who go the extra mile with commitment to long term success that advocate for their organization, just as ours did.

The top word to describe our workplace? Fun! And we are very proud of our family atmosphere. We work hard with the good of our team in mind and have a ball doing it. Any given day you can arrive to find a catered breakfast or lunch being delivered. We also enjoy a good happy hour together here and there. Tons of office events, contests, giveaways and general recognition keep the energy high in our transparent, collaborative and supportive work home. Our leadership team knows how to keep us inspired.

KC BBQ

We don’t stop there. Our appreciation to employees shows in generous compensation, flexible hours and great benefits, like a 6 percent 401(k) match (immediately vested). Listening and open dialogue helped us deliver on the other wish list items were heard: standing desks, dedicated training by role, development opportunities and an employee appreciation event we held at the American Royal barbecue festival.

Put employees first and they will put clients first. It really is that simple. The evidence is in another recent award. We were ranked 10th in the KCBJ Fast 50 List with 92.5% revenue growth from 2015-2017. In that time we have added nearly 50 new employees, starting with 6 in 2015.

Fast50 Awards

Stay the Course into the Future

We plan to never lose sight of who got us here. Our people will remain the top priority. The culture we’ve created, alongside our business processes, will be scalable and sustainable. With a commitment to get better every day, leadership will continue listening to the team. The unique, fun, supportive culture here will help us attract new people that align with our core values. They will support and be supported by our team as we continue to grow. We cannot help but think there are many more awards in our future!

 

 

Prepare for an RFP in 4 Steps

As a large-scale shipper, you use a request for proposal (RFP) to put freight out for bid, typically on an annual basis, correct? You are smart. This process helps keep your current freight providers on their game and gives you the opportunity to evaluate the capability of newcomers. Here are four steps that will have you well-prepared for your RFP process:

1. Get Organized

Details. And lots of them. That is the basis of a good RFP. The homework you need to do is not only for the sake of line items in the RFP but also for the alignment of your internal team. You need to work together to define the ideal outcome of the process. Once you are in lockstep regarding what a successful RFP looks like, there will be numerous facts to gather and decisions to make. You should get a jump start on these:

  • Know your annual freight spend and volume
    • When you can, break your spend out by mode. This will help pinpoint your savings potential and give you data to measure against.
  • Profile your freight in detail
    • The particulars will help freight providers create tailored solutions for you. Document your freight’s handling requirements, load time, standard weights, pickup and delivery times. Providers will also want to know if you have driver-friendly facilities and how quickly you pay. It is also beneficial to document the efficiency of your check-in and check-out process.
  • Outline the full objectives of your RFP in your clear and concise bid package
    • This is where you define your expectations for the RFP. What do you hope to achieve? Freight services want to provide the information you are looking for. This will help both your organization and those invited to bid to act with intention throughout the process.  
  • Set the number of bid rounds
    • The number of rounds in the RFP process helps those bidding understand your communication cadence and informs their own strategy in regard to winning your business.

Pro tip! Gather visuals of the products you ship. Part of your job is to make your freight attractive to the service provider. They need to want to move your freight.

2. Determine the Participants

Your carrier strategy likely includes a mix of carriers and third-party logistics companies (3PLs) — small, large, national, regional. The tender percentage awarded to each is deliberate and likely based on the requirements of your freight. Bring this same thought process as you determine the invite list of your RFP. You want a good mix to help you thrive in a changing logistics landscape. Balance this group based on fit with your supply chain operations.

The RFP process is the perfect opportunity to evaluate your incumbent shipping services against potential new providers — how they compare on rates as well as overall fit in your strategy. Remember, these partners can make a large impact on how customers view your reliability. So, once you have your carrier mix determined, go ahead and prepare your list of hard-hitting questions:

  • How does our freight fit into your network?
  • Where will we rank among your clients in freight spend?
  • Are we aligned on KPIs?
  • Have you done X before?
    • Whatever your freight requires, make sure they have handled that situation in the past.

3. Establish a Benchmark

To determine your RFPs success, you have to know if it helped you hit your established goals. So, you need a baseline for comparison. There are a few ways you can accomplish this:

  • Gather historical data from your company
  • Reach out to industry trade associations that may share their knowledge
  • Work with an outside consultant

As you are compiling this data, be on the lookout for opportunities to optimize your transportation program. Maybe your RFP should consider modal conversion or the opportunities for lane aggregation.  

After a set time, once your new RFP is in place, look at the numbers in comparison to your baseline. Are they trending in the manner you had hoped? Preparing for measurement and analysis is a plan for success.

4. Outline RFP Administration

You will need to create a system of checks and balances for the RFP process to help secure the best outcome for your business. Define the communication pattern so you have a game plan to reach out to the participants after each round. We also advise an open line of communication with carriers and providers throughout the course of the RFP.

Pro tip! Do not provide target rates in your initial RFP. It could adversely impact the results and cause you to overlook providers that are a great fit with your operations.

After the RFP Process

You prepared and administered your RFP. Now what? Once your freight has been awarded, there is still more to do to get the trucks rolling. Onboarding calls are very important to make sure you are on the same page with each provider regarding service levels and volume commitments. You put a significant amount of your time and energy into the RFP, work to make sure it was worth the investment.

3PLs are a vital part of success in most supply chains. Your carrier strategy likely endorses a mix of 3PLs and asset-based carriers. We provide the value of strategy and solution that only a 3PL can. If our networks compliment one another, we will be a trusted resource to help your company succeed in hitting the goals of your RFP and beyond.

Submit your RFP to inquiry@agforcets.com.

 

Agforce Transport Services Joins U.S. EPA SmartWay® Transport Partnership

Leawood, KS — Agforce Transport Services today announced that it joined the SmartWay® Transport Partnership, an innovative collaboration between U.S. Environmental Protection Agency (EPA) and industry that provides a framework to assess the environmental and energy efficiency of goods movement supply chains.

Agforce Transport Services will contribute to the Partnership’s savings of 215.4 million barrels of oil, $29.7 billion in fuel costs and 103 million tons of air pollutants. This is equivalent to eliminating annual energy use in over 14 million homes. By joining SmartWay Transport Partnership, Agforce Transport Services demonstrates its strong environmental leadership and corporate responsibility.

“As a broker, we are conscious of the carriers we choose to move freight in our network, currently partnering with more than 300 SmartWay carriers. It’s not an easy designation for carriers to achieve, and it speaks to their overall quality and dedication to sustainability. We see this partnership as invaluable to our green efforts and the overall environmental footprint of the freight industry,” said Andy Tuley, Vice President – Business Development.

Developed jointly in early 2003 by EPA and Charter Partners represented by industry stakeholders, environmental groups, American Trucking Associations, and Business for Social Responsibility, this innovative program was launched in 2004. Partners rely upon SmartWay tools and approaches to track and reduce emissions and fuel use from goods movement. The Partnership currently has over 3,000 Partners including shipper, logistics companies, truck, rail, barge, and multimodal carriers.

Agforce offers streamlined and flexible services helping companies dramatically improve their supply chain. We deliver the most effective solution for your business to help you ship your product where it needs to be — when it needs to be there. Together, we can simplify logistics. For more information about Agforce Transport Services, visit agforcets.com or call 844.713.6723.

For information about the SmartWay Transport Partnership visit www.epa.gov/smartway.

LTL Rate Increases and Market Saturation

High demand and favorable market conditions mean most LTL carriers find themselves firmly in the driver’s seat when it comes to pricing and choice of freight as we enter the second half of 2018. Peak shipping season occurs during the third and fourth quarters along with contract negotiation between many shippers and carriers. With LTL companies already operating at full capacity and the undeniable impact of freight rates on profitability for most companies, shippers will be better prepared for what’s ahead when you understand the why behind the current state of the LTL market.

  • LTL Capacity
    While the economy is certainly a catalyst of LTL demand, there are other contributing factors. Tight LTL capacity also stems from the changing retail landscape (brick-and-mortar to ecommerce), spillover from full truckload demand, available equipment, and competition for available drivers.
  • Retail
    The “middle mile” of ecommerce shipments are often handled by LTL carriers. With a 16 percent growth in online retail purchases in 2017, and little sign of slow-down in 2018, ecommerce will continue to impact LTL capacity. Some carriers have adjusted operations by adding hubs and service centers to accommodate the industry, including their more rigid on-time delivery expectations.
  • Truckload Demand Spillover
    The overly saturated truckload market has some shippers looking to LTL carriers. That being said, heavy partial truckload shipments are not always ideal in LTL carrier operations. This has many carriers weeding out the freight that does not complement their network.
  • Available Equipment
    According to an article from Supply Chain 24/7, LTL carriers have not added much equipment to their fleets in the past few years. They speculate, however, that even a surge in available trucks would not have much impact due to the driver shortage.
  • Available Drivers
    Several growth sectors, including construction and manufacturing, share a workforce with LTL carriers. Competition within other industries that may offer more lucrative opportunity is a challenge for LTL carriers. The driver shortage of the truckload sector has not yet had a large impact on LTL.

Unexpected Consequences of High Demand

The benefit of high demand for LTL carriers is revenue growth — which is up 10% or more through volume or yield gains. It is not all roses though. There are challenges for carriers operating over capacity, and shippers are likely to feel it.

Carriers are maximizing profits, in part by weeding out freight that is less profitable — not a good fit for their network or operations. They are using pricing initiatives that make the shipments costly and ultimately leave shippers disinclined to tender freight that carriers find unattractive.

The freight that is moving through the overly saturated LTL operations may experience inconsistent service levels. Some terminals are already running weeks behind. The holiday surge will likely bring more missed pickups and transit delays for shippers. Without enough employees or equipment to handle such high shipment volume, some carriers have embargoed their guaranteed transit services. YRC Worldwide has suspended reimbursement of their Time-Critical service due to their struggle to keep up with demand. A note on their website indicates they may reinstate the practice, but are still facing difficulties, “We are currently working on a re-launch of our time critical services. While our service is improving, we continue to face industry challenges including peak shipping volumes, driver shortages and capacity constraints.”

Summary

With carriers’ eyes on profits and high demand in the market, freight shipping rates are likely to continue increasing during shipper-carrier contract negotiation the remainder of the year. Prices will go up, but do not expect service levels to do the same. Most LTL carriers are not operationally equipped to handle this surge in demand. Shippers will need to prepare for inconsistent transit days and allow time in their supply chain for things like missed pickups and late shipments.

Together, we can simplify logistics. Contact us today for a free consultation. Give us a call at 844.713.6723 or email us at inquiry@agforcets.com.

 

National Truck Driver Appreciation Week and Beyond — Thank a Truck Driver

From the alarm clock you snooze in the morning to the TV you Netflix and chill with at night, it’s likely you have a truck driver to thank for making all the things you need, want and enjoy in your life accessible. We appreciate our driver partners every day, and we love the spotlight they enjoy during National Truck Driver Appreciation Week. It is a great time to reflect on all they do to keep our nation connected.

Let’s take a minute to explore the importance of truck drivers. They are undoubtedly the center of the freight industry, making it possible to move goods from here to there. Could they also be the hub of our general society? Think about the important institutions that would have trouble obtaining resources without truck drivers, like hospitals or prisons.

In an article by TruckerPlanet.net, they consider a world sans drivers. Their article states in the first 24 hours without truck drivers hospital, service station, and manufacturing operations would be impacted, as well as food supply. In the days that follow, supplies would become scarce and food shortage would be a concern — not to mention waste build up. Imagining this scenario makes it quite easy to give thanks to the men and women that help keep us cared for and fed.

It also shows just how important the trucking industry is to our national economy, contributing nearly $739 billion in revenue a year. About 70 percent of all freight tonnage is transported by truck, and 80 percent of U.S. communities are supplied by trucking deliveries.

There are currently 15.5 million trucks in operation traveling more than four million miles of roads. We imagined a world without drivers, but even a drop in the number of truckers on the road would have significant consequences. It would almost immediately translate to slower delivery times and higher priced goods.

Truck Driving is Hard

Let’s not forget what truck drivers give up to help us stay connected and productive, starting with the time they spend away from family and friends. Driving about 125,000 miles a year, they may have around 3 weeks between nights in their own bed.

In addition, a truck driver’s health can suffer. Over the road drivers may not have a lot of choice when it comes to healthy food selection, and sitting for long periods of time is not good for anyone. Seeing a doctor or health care professional in general can be a challenge for truck drivers with their schedules allowing for limited time at home.

And how can we not mention the dangers drivers face on the road itself? We need our drivers safe. That is easier said than done when you’re hauling 45,000 pounds or more during rush hour in Chicago, in the dark of night around sharp corners, or in frigid conditions while snow starts to accumulate. That is more than most of us would be willing to put on the line. It takes a lot of skill to navigate the roads in a truck.

Showing Appreciation

Long story short, drivers do more for us in our everyday life than what is typically recognized. From keeping gas in the stations to apples in the store, they keep us connected to the goods we cannot live without – often at a cost to their personal lives. With that in mind, let’s remember to thank our hardworking truck drivers during National Driver Appreciation Week, and every day that follows. They truly deserve respect and appreciation for the work they do to keep our country moving.

Together, we can simplify logistics. Contact us today for a free consultation. Give us a call at 844.713.6723 or email us at inquiry@agforcets.com.

 

What’s Driving the Trucker Shortage?

The U.S. trucking industry is short of drivers—about 50,000 short, according to an October 2017 estimate from the American Trucking Associations (ATA). The developing driver drought is a critical issue that has captured the attention of the trucking world: In an annual survey conducted by the American Transportation Research Institute, driver shortage ranked first among industry concerns.

A number of factors are contributing to the shortage, ranging from economic trends to demographic and regulatory shifts to the rigors of the job:

  • Freight volumes are on the rise, thanks to healthy commerce and a strengthening economy.
  • The average driver age for commercial truck drivers in the U.S. is 55, and 25 percent of current drivers near retirement age.
  • The trucking industry is having trouble attracting younger people to the profession. One issue is that prospective drivers must be 21 years old to hold an interstate commercial driver’s license. That typically means three years after high school, by which point many potential candidates have pursued jobs in other sectors.
  • A range of federal regulations—most recently the Elog mandate put in place in April—require truckers to track the time they work, which can impact productivity, and thus pay.
  • The long hours and requirements of the job can limit its appeal. Most drivers—especially newer ones—are on the road for extended periods of time, returning home only a few times a month. Adapting to life on the road (showering at rest stops, limited dietary choices, safety issues, and more) can make the job less appealing to some.
  • Drivers must pass a DOT (Department of Transportation) physical at least every two years. Some with specific health issues must do this annually. A lot of times the driver must pay for the physical out of their own pocket.
  • Sleep apnea and diabetes can disqualify a driver if certain criteria are not met.
  • Carriers cannot find drivers that can pass the required drug test at hire and then randomly throughout their employment.

The ATA estimates that because of industry growth and retirements, the trucking sector will need to recruit nearly 100,000 new drivers every year to keep up with the demand for drivers. The shortage is particularly acute in the long-haul, over-the-road truckload segment.

There are steps the trucking industry can take to help address the need for drivers:

  • Try to expand the demographic. For example, women currently make up only 6 percent of the truck drivers. Some observers see veterans seeking career transition after military service as another good potential source of prospective truckers.
  • Continue to boost driver wages. The national median for truck driver pay is $53,000, which represents a $7,000 increase from the previous year. For private fleet drivers, the pay increase is up $13,000.
  • Decrease time on the road. Trucking companies can address lifestyle issues of the profession by offering route options that are closer to drivers’ homes, reducing the long-haul lifestyle aspects of the job.

The truck driver shortage affects the entire economy and could have a significant impact on supplier costs and shipping delays. Agforce Transport Services monitors and tracks trucking industry developments like the driver shortage to provide informed consultation to customers.

Agforce specializes in customized transportation solutions for our customers’ specific business requirements. To learn more about how we can help address your company’s needs, contact us today for a free consultation. Give us a call at 844-713-6723 or email us at inquiry@agforcets.com.