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Considering Contract Intermodal Transportation through 2020

Back in January, Brett Eckinger, Director of Sales at Agforce, predicted that intermodal transport would be a good option for many of our clients’ shipping needs in 2020. “We’ll see intermodal getting healthier,” he said. “I think we’ll be able to utilize it a bit more in order to deliver customers’ goods more efficiently.”

And then COVID-19 hit, first internationally and then in the U.S. It disrupted supply chains and wreaked havoc on shipping rates, timelines and efficiency. Though we seem to be past the sudden disruptive shock of the pandemic, it will continue to send waves of uncertainty through the rest of 2020, especially in the logistics market.

Amid this uncertainty, IHS Markit published its quarterly analysis of US intermodal rates, trends and futures, titled US Intermodal Savings Index: An Analysis of the Domestic Intermodal and Truckload Markets.

It, too, acknowledges the market volatility caused by COVID-19, but pointed toward one conclusion in particular: intermodal is a great option right now if you’re looking for consistent pricing on consistent business.

Not only do you get the ”flexibility of over-the-road trucking with the affordability of long-haul rail shipping, all without an investment in tracks,” as Loup Logistics puts it, but you also get the promise of more consistency than we predict in trucking for the rest of the year.

Here’s what the report says happened in Q1: “Once COVID-19 arrived in the US, JOC’s Spot ISI dramatically reversed course. The April reading was 102.9, the weakest month since February 2019 and a stark reversal from 116.5 in March 2020.”

That means that in March, spot intermodal rates were 16.5% cheaper than spot trucking rates, but by April they were just 2.9% cheaper.

Contract intermodal, however, which we are recommending to clients whenever possible, “slipped only one point sequentially to 118.2 in April.” While this is still less of a savings than the historic average (18.2% savings compared to an average 24.5%), it’s still significant compared to truckload.

Contract truckload rates did drop while intermodal rose, but the savings are still notable. While trucking rates went from $1.91 per mile to $1.76 per mile, contract rates rose just one cent, from $1.45 to $1.46.

“Contract markets are typically less volatile during sudden disruptions such as COVID-19,” the report says.

And while it might be tempting to “save money” by choosing spot rates in the short term, for fear of what the future will bring, holding steady and choosing consistency is a better move.

Jim Filter, senior vice president of intermodal for Schneider National agrees, urging shippers to resist turning into transactional customers. “You have three intermodal carriers that represent 70 percent of the market, and [shippers] don’t want to burn a relationship. It’s going to be more harmful long term than any short-term gain,” he said.

Of course, what’s right for you is nuanced, and Agforce understands that. Give us a call at 877.367.2324 or email inquiry@agforcets.com and we’ll put together a personalized recommendation based on your needs and our expertise.

Trucking Outlook 2020: Trade Deals, Tariffs and Tech (Oh, My!)

At this point, making predictions for the trucking market feels almost like playing roulette. In an industry that’s widely understood to be quickly cyclical and dependent on quite literally dozens of factors, it’s almost anyone’s guess how the market will fare even a few months from now. 2018 will be remembered for having two of the best quarters for revenue in trucking’s history, but 2019 was slower, due to tariff uncertainty, excess capacity in the market and many companies holding excess inventory.

As for 2020? The evidence is difficult to interpret.

“We typically look for clues from the past 12 months that offer insight into the next 12. Those clues are less obvious this year, though, because 2019 sent a flurry of mixed signals,” says a new DAT report. “There were the negative signs: Air and sea cargo were down, railroad volumes were subpar, and manufacturing slumped. On the positive side, truckload freight increased 4 percent year over year, and the spot market grew even faster. Dry van freight volumes were especially strong. 

“2020 is going to be a very, very tough year,” says Kenny Vieth, ACT Research President. But Agforce experts aren’t so sure about that … not all of them, anyway. 

“2020 should be a better year for logistics than 2019,” says Andy Tuley, Vice President of Business Development at Agforce. “Some of the bankruptcies that have happened recently should cause capacity to return close to equal and the market should tighten. This should push rates up to a level that should help carriers with cash flows. It will allow more even distribution in the marketplace.”

Michael Preisinger, Managing Director at Agforce, believes, based on his conversations with trucking companies and customers, that “the domestic transportation market will begin to tighten in the spring. Most of what I am reading is saying the same. By spring we should have clarity around the trade agreement with China which will give companies a better idea of how to invest in their business. Also, the large number of trucking companies that have gone out of business in the last year will leave the market with less capacity as transportation volume increases in the market.

China is on other experts’ minds, as well. “Market volatility will be a big player in the market next year, especially with some of the political issues across the world,” says Brian Phipps, Agforce Director of Carrier Sales. “Fuel prices will be a significant player as tensions in the region play out, while the trade deal with China will continue to have a real impact on volume at our ports.”

“Trucking companies will need to be aware of international trade deals and tariffs,” says Brett Eckinger, Director of Sales at Agforce. “They also need to prepare for the upcoming drug enforcement policies that will make it harder for drivers to fail a drug test and move on to another company. Those will be reported in ways that make it impossible for truck drivers to seek employment elsewhere.”

“Carriers with parked trucks that they aren’t able to fill due to the drug testing changes are likely to miss some of this upcoming tailwind,” says Tuley. 

For companies shipping product, the 2020 outlook is fairly positive, thanks to trends in technology and intermodal shipping. “We’ll see better tracking and tracing, and true AI load matching, says Director of Agribusiness John Kuhlmann.

“The digital marketplaces are actually starting to become digital,” says Tuley. “The idea has been there, but the back office part is really still pretty manual. Now that Convoy has announced they’ve become fully digital in select marketplaces, I expect that trend to continue at a quicker pace in 2020. I think we’ll see some consolidation among providers and a few ‘leaders of the pack’ emerge in this space.”

Intermodal, too, should be trending positively. “We’ll see intermodal getting healthier,” says Eckinger. “I think we’ll be able to utilize it a bit more in order to deliver customers’ goods more efficiently.” 

“The rails should see positive growth,” says Tuley, “as long as trucking rates rise to where business can shift back to intermodal. Volumes were very low there in 2019.” 

“Overall, there will be more situational opportunity in 2020 than there was in 2019,” says Kuhlmann. “With the carriers that have shut down and capacity utilization at almost 100%, supply isn’t meeting demand. There will be a lot of chances to fill that gap.” 

Want to understand the best ways to capitalize on the opportunity and volatility of 2020? Call Agforce at 877.367.2324 or email us at inquiry@agforcets.com.

It’s now tougher for truckers to get the all-clear, thanks to the Clearinghouse.

“We have a huge drug abuse problem in the trucking industry, and should actually purge an estimated 300,000 commercial drivers to clean it up,” says Lane Kidd, Managing Director of the Trucking Alliance. “No wonder truck accidents are on the rise.”

Sobering estimate, huh? 

Enter the US DOT Drug & Alcohol Clearinghouse

Earlier this month, the Federal Motor Carrier Safety Administration (FMCSA) officially rolled out the Drug & Alcohol Clearinghouse, a secure online database that standardizes and provides authorized users with the records of professional drivers.

With access to The Clearinghouse, employers, the FMCSA, State Driver Licensing Agencies (SDLAs), and State law enforcement personnel will have information about any drug or alcohol program violations on the records of commercial driver’s license (CDL) and commercial learner’s permit (CLP) holders.

This means it will no longer be possible for drivers who have committed a drug and alcohol program violation while working for one employer to get hired by another employer by failing to report the violation. Instead, the Clearinghouse will keep detailed records on each driver (including limo drivers, school bus drivers, construction equipment operators and sanitation drivers, too, not just truckers) that potential employers can access to improve hiring practices. It also makes it possible for prospective employers to obtain substance abuse history from companies that have gone out of business, or obtaining information from companies that do not cooperate timely with background check requests.

“The Clearinghouse will identify drivers who move frequently and obtain CDLs in different states and link those CDLs,” says the FMCSA, “in order to maintain complete and accurate information on such drivers.”

Its database will retain records of drivers with reported violations of the current regulations including:

  • Reporting for duty or remain on duty for safety-sensitive functions with an alcohol concentration of 0.04 or greater
  • Reporting for duty or remaining on duty for safety-sensitive functions while using any drug specified in Part 40 of the regulations, other than those prescribed by a licensed medical practitioner 
  • Using alcohol while performing, or within four hours of performing, a safety-sensitive function
  • Using alcohol within eight hours of an accident, or before submitting a post-accident test, whichever occurs first 
  • Testing positive for use of Clearinghouse-specified drugs 
  • Refusing to submit to a required alcohol or drug test (which automatically registers as a failure)

These driver consent records will be retained in the database for five years.The Clearinghouse was created by an act of Congress directive to the Secretary of Transportation, with the primary intent of improving highway safety. Once it’s fully operational, the Clearinghouse will:

  • Make it easier for employers to investigate and report on potential drivers
  • Make it harder for drivers to hide drug and alcohol violations from current or prospective employers
  • Provide roadside inspectors and other enforcement personnel with the means to ensure that drivers receive required evaluation and treatment before performing safety-sensitive functions
  • Make it easier for FMCSA to determine employer compliance with testing, investigation, and reporting requirements

“The Clearinghouse provides FMCSA and employers the necessary tools to identify drivers who are prohibited from operating a CMV based on U.S. Department of Transportation (DOT) drug and alcohol program violations,” the FMCSA says, “and ensures that such drivers receive the required evaluation and treatment before operating a CMV on public roads.”

When do Clearinghouse rules apply?

As of this month, “employers will be required to conduct both electronic queries and traditional manual inquiries with previous employers to meet the three-year timeframe … for checking CDL driver violation histories,” says the FMCSA. “Drivers may also view their own records for information recorded on or after January 6, 2020.”  Once three years of violation data are stored in the Clearinghouse, employers will no longer be required to obtain the traditional manual inquiries from previous employers.

However, the FMCSA recently extended the compliance date for state agencies by three years, to give state motor vehicle agencies more time to configure their IT systems to interact securely and accurately with the Clearinghouse. 

“The compliance date extension allows FMCSA the time needed to complete its work on a forthcoming rulemaking to address the states’ use of driver-specific information from the clearinghouse and time to develop the information technology platform through which states will electronically request and receive clearinghouse information,” the agency said.

The Clearinghouse regulations require FMCSA-regulated employers, Medical Review Officers, Substance Abuse Professionals, consortia/third party administrators, and other service agents to report violations of the substance abuse regulations for current and prospective employees. The Clearinghouse regulations also require employees to query the Clearinghouse for prospective employees’ drug and alcohol violations before permitting those employees to operate a commercial motor vehicle AND to annually query the Clearinghouse for each driver they currently employ.

What does this mean for the logistics industry? 

Cracking down on drug and alcohol program violations does mean that the shortage of truck drivers will become even more severe. And once upcoming federal regulations enforce hair testing of drivers rather than just urinalysis, the gap will continue to widen. 

Draft guidelines for government-wide hair testing “have been distributed to all federal agencies for a second round of comment and review, and the length of time for review will be determined by the Office of Management and Budget,” the U.S. Department of Health and Human Services confirmed in early December.

A recent study by the Trucking Alliance, based on 3.5 million commercial drivers and projecting a 99% confidence level, says that more than 300,000 truck drivers currently on the road would fail or refuse a hair analysis. 

“The test results indicated a major discrepancy between the number of drivers who failed a urinalysis drug screen and those who failed a hair test,” The Trucking Alliance said. “While 949 (0.6%) applicants failed the urine test, 12,824 (8.5%) either failed or refused to submit to a hair test. The US Department of Transportation classifies refusals to submit to a drug or alcohol screening as a failure. This yielded a hair test failure rate 14.2 times greater than urine.”

Not only will these enforcements cut down on the pool of truckers driving today, they may also affect the pool of new drivers willing to fill the resulting demand. 

“I think a 3% capacity reduction within the first six months of the year is realistic and will have a material impact on what the supply-demand dynamic looks like in 2020,” Derek Leathers, president and CEO of Werner Enterprises told FreightWaves.

Looking on the bright side

Sure, the Drug & Alcohol Clearinghouse is likely to result in some short-term demand for drivers, which may slow some of your shipments. But for Agforce, this means we’ll ultimately have even more confidence in the drivers we work with … and you can have more confidence in them, too. 

If you have any questions about the Clearinghouse, how it works, how it’s used, when it goes into effect or how it will affect your business, reach out. We’re happy to talk you through it. Call us at 877.367.2324 or email us at inquiry@agforcets.com.

Case Study: Thurston, Inc.

The Client

“I didn’t realize how easy it could be. Night and day difference,” raved Amanda with Thurston, Inc., a leading hybrid seed brokerage, while speaking of the difference in their freight shipping from one year to the next. And she gives full credit for the change to Ingrid. 

You see, Ingrid is one of our logistics experts, and after she and Amanda met, Ingrid promised Amanda she would never have to worry about what was happening with her freight again. Ingrid has been making good on that promise ever since. 

Opportunity for Improvement

Before Agforce and Ingrid, Amanda was working with multiple sources to move her truckload and LTL freight. The general nature of Thurston’s business means there is sensitivity around blind shipping. So, they need good communication and affirmation for peace of mind. They need to know the shipper and consignee will stay unknown to each other. Their previous resources didn’t give them much reassurance around shipments being picked up, let alone confidence the paperwork would be handled correctly. 

Amanda wears a lot of different hats at Thurston. There is simply not enough time in the day for her to get everything done if she’s constantly checking on the state of their freight. Plus, she knew that if she didn’t receive communication from the 3PLs and carriers she tendered freight to, her customers weren’t receiving any updates either. They couldn’t allow their freight shipping to leave a sour taste in their client’s mouths. 

Solution Design

Ingrid’s goal: Give Amanda the confidence to know her freight is handled. Ingrid and the team laid out a communication plan that prioritized immediate response when Amanda submits a load for pickup, and they reach out with updates so she can know things are on track. Ingrid wanted to ensure Amanda could work on the other things that keep Thurston running, and doesn’t have to worry about follow up with her freight. 

Today’s Processes 

Amanda shared, “It’s been a big weight off my shoulders. Agforce just makes freight easier.” She went on to tell us the amount of time she has to spend dealing with freight has been cut down due to the good service and communication from Ingrid. During their heavy truckload season, they used to wait up to two and a half weeks between loads while their 3PL sourced equipment. Ingrid put processes in place and found carriers that appreciated the regularity of Thurston’s freight with multiple loads in the same lane to secure the best service. Thurston made it through their busy shipping season in record time! 

Amanda knows she’s not alone in her appreciation of Ingrid. Their customers even remark on how great Ingrid is to work with and appreciate the quality drivers she sends to their facilities. 

If your freight shipping could use someone like Ingrid, let’s talk. Wouldn’t you like some time back to focus on the other stuff? Together, we can move your business forward. Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.

Sip, Sip, Hooray! Agforce and Fastbreak Collaborate on Warehouse Expansion

Agforce has doubled down on its longstanding partnership with Fastbreak Consolidators, Inc, the leader in Northern California wine consolidation, to increase warehouse space by 10,000 square feet. This extra space, plus investments in additional drivers and tracking technology, means we can pass our unique experience and understanding along to more customers who need us. 

Fastbreak Warehouse

“This is the first foray into warehouse space for Agforce,” says Andy Tuley, Vice President of Business Development. “It not only signals the growth and evolution of our business, but the lockstep relationship we have with Fastbreak. No other consolidators in the industry have honed in on their expertise like Fastbreak, and they’ve done it intentionally so that makes it easy for us to treat our customers right.”

Distributors across the United States rely on the Fastbreak and Agforce partnership for quick, efficient wine deliveries no matter the situation. “Let’s say your sales rep has a wine vendor coming next week that nobody told you about. Or someone scheduled a wine dinner for next week, and you don’t have the product. You can call us in a panic at 3 p.m. on a Friday, and we’ll make it happen,” says Chris Stranckmeyer, Manager Business Development Wine & Spirits. “We’re not even going to argue. We’re going to get off the phone as quickly as possible so we can send a driver to get the product you need and get it to you on time. We get it, and that’s why we get it done.” 

The Agforce and Fastbreak partnership eliminates partially-filled truckloads, maximizes the use of all capacity and includes access to proprietary technology that provides visibility into all aspects of an order. In short, it’s airtight. 

“Together, Fastbreak and Agforce are able to show customers exactly who is taking care of their product, its status and its estimated delivery time, from our warehouse door to the customer’s door,” says Kathy Edwards, Fastbreak Office Manager.

Fastbreak Warehouse

“We pass the baton back and forth so quickly that our customers don’t even notice it happening,” says Tuley. “All they notice is that we can meet their needs – no matter how crazy, last-minute or specific, in a way no other 3PL can.”

Both companies are committed to customer service, customer retention, growth and laser-focus on what we do best. As the wine consolidation industry grows and shifts, Fastbreak remains the leader, even amid other companies’ mergers and acquisitions. And it appreciates Agforce’s contribution to its growth, viewing us as an extension of its company that it can trust to treat customers in the same way it would. 

“Fastbreak has been committed to its core values for more than 30 years. While others change, try to diversify, or get bought out, we continue to stay true to ourselves and what we do. We’ve found a true partner in Agforce – they support and complement our firm foundation,” says Edwards.

We’re so confident in our continued growth that increasing our warehouse capacity by 25% was a no-brainer.

“In 2018, Fastbreak and Agforce consolidated more than 3.5 million cases of wine, a number that will only increase this year and into the future,” says Brett Eckinger, Director of Sales at Agforce. “We are thrilled at the additional volume our new warehouse space will allow us, and the additional value we will be able to offer our customers based on this investment. We are proud to celebrate our continued growth as a Fastbreak partner.” 

A toast to Fastbreak, Agforce and our customers!

Want in on the amazing agility Agforce and Fastbreak provide? Give us a call at 877.367.2324 or email us at inquiry@agforcets.com.

Predicting 2019 Trucking Spot Rates

Our experts weigh in on what you can expect for the rest of the year.

Last month, FreightWaves, the first organization to develop a futures market based on U.S. trucking spot rates, took four models forecasting trucking spot rates for the rest of the year, and compared them against each other to predict pricing for the second half of 2019. 

Based on historical and future data provided by various freight indexes, FreightWaves provided a comprehensive analysis of all the factors affecting spot rates. 

The analysis is so comprehensive, in fact, that it may be a little dense for those of you who don’t necessarily follow the futures market but just want to know how much you’re going to pay to get your product from Point A to Point B. 

Our experts wanted to analyze the analysis (that’s right) and give you an overview of which conclusions we think are the most important, what we believe the market is likely to do over the next six months (and why) and add our own insights into trucking rates in 2019. First, here are our takeaways of what we considered most important to note from the FreightWaves article:

  • “Positive movement depends on…even more capacity to leave the market as well as new truck orders to stay depressed for the remainder of 2019.”
  • “The market looks flat into the third quarter with a seasonal bounce again at year’s end.” (Tom Mallon, FreightWaves Vice President of Financial & Freight Futures Markets)
  • “Expect to see the supply side supportive of rates, especially with the recent sharp decline in new truck orders.” (Ravi Shanker, Morgan Stanley Analyst)
  • “June contracts are priced at $1.59 per mile, implying a significant bump up from [May] spot rates at $1.41/mile. That’s consistent with the traditional volume and price run-up seen most years in May and June.”
  • “At this point, the market expects a return to the relatively normal price conditions preceding the capacity-constrained environment of 2017-8.”

Since the piece was published, we haven’t seen any indication that these conclusions are off-base. “We saw a holiday at the end of May followed by DOT week. DOT week was not reported to be as big of an event this year as in years past, but it still had an impact on capacity. Spot rates then went up in June, which is normal,” says Justin Hathaway, Carrier Manager. 

But is “normal” actually…normal? Not recently. We think it’s most important to note is that while 2019 looks pretty steady, it’s coming on the heels of a 2018 that was decidedly unsteady. There’s pressure on spot rates to hold strong as the shipping industry as a whole normalizes after very strong rate growth (6.7% annually) in 2018 and a quick tumble downward at the beginning of 2019. 

Because the market couldn’t support the growth of 2018 and diesel fuel supplies tightened due to production cuts, spot rates bottomed out at the beginning of this year, as did the price of diesel. These factors, among others, have led to an extremely volatile recent history.

“After the downhill slide of the last six months, both carriers and brokers are positioning themselves to maintain their current volumes while getting aggressive to secure new business,” says John Kuhlmann, Director of Agribusiness. “From a pricing perspective, we have seen rates bottom out in several markets, but given the current business landscape, there will be pockets where they may climb back up with seasonality, etc.”

Overall, though, “we speculate that Q3 will be flat, but the market will support modest price increases through the end of the year,” Kuhlmann says. “We are not expecting any major market shake-ups before the holiday shipping season starts.”

“My gut tells me spot quote prices will continue to rise in certain regions, but won’t approach where the market was in the first half of 2018,” says Joe McDonald, Business Development. “Ultimately, I see pricing being flat to higher in areas than early 2019, and more in line with pre-2017-2018’s higher pricing.”

According to the Wells Fargo 2Q 2019 North American Truck Transportation Sector Update, these current levels of volume and pricing suggest that the U.S. economy is still growing, just not at the rate it was, and that it may have reached its short-term expansion limit. Of course, nobody can predict the future with complete accuracy. So what are the factors most likely to influence the moderate pricing increases we anticipate for the rest of 2019 and into 2020?

  • Economy and trade policy: “Moving to 2020, I believe that load volumes largely depend on the health of the US economy (and confidence in the US economy),” says McDonald. “Trade policy is definitely a deterrent to higher load volumes, so I’d expect load volumes to remain flat.”
  • Tariff rates: “Pending tariff rates for USMCA, we should see rates uptick slightly as we move into Q3 and Q4 if seasonal volumes remain consistent,” Kuhlmann says. “If volumes shift up drastically, we can expect intense volatility from both pricing and capacity.”
  • Driver availability: According to American Trucking Association estimates, the trucking sector had a driver shortage of 50,000 at the end of 2017. It predicts a longer-term driver shortage of 175,000 by 2026. New driver availability remains an issue and area of significant concern.

Truck capacity and demand: “As always, two major variables are truck capacity and demand/volume,” says Hathaway.

Here at Agforce, we don’t claim to be able to influence trucking spot rates or the futures market. We do, however, guarantee complete honesty and transparency into how and why we set our prices. Our customers are our partners and our friends, and that’s something we owe to them. We will continue watching the market so we have the best, most up-to-date information possible to pass along to you.

Questions? Reach out! Call us at 877.367.2324 or email us at inquiry@agforcets.com. Our experts would love to provide the answers.

Case Study: Major Brands

The Client

Major Brands is a leading Missouri distributor of premium spirits, wine, beer, and non-alcoholic beverages, and the largest distributor that remains Missouri-owned and operated.

With offices in St. Louis, Kansas City, Springfield, Columbia and Cape Girardeau, Major Brands employs more than 600 people and serves more than 9,000 retail customers throughout the state.

Opportunity for Improvement

We were moving Major Brands inbound freight through a system of multi-pickup truckloads. Their shipments consisted of a variation of wine, spirits and beer shipping from ports, distilleries and manufacturers across the U.S. But, it wasn’t perfect.   

The multi-pick solution started to create a hassle with missed pickups and late deliveries on Major Brands’ purchase orders. “We had planned ship dates and our sales people worked off of delivery targets. With the fluid market for spirits, slipups started to impact our pricing, bottom line and overall customer experience,” shared Erin Evans, Inventory and Transportation Manager.

They needed to consider different options for their freight in order to operate with more efficiency and dependable timelines.

Solution Design

Our team members Michelle and Chris were on it. The short-term goal was a solution we could implement to solve the inconsistency of Major Brands freight shipping. Long term, we wanted to create a relationship that would provide value to Major Brands.

To do so, Chris, Michelle and the rest of our team worked together to design a tailored plan. We developed a plan with a mixture of LTL and multi-pick loads that focused primarily on the per case cost to the customer. Not only did this provide a lower transportation cost to the customer, it also allowed us to work within the confines and time restraints of Major Brands wide array of vendors. The result is a cost effective, time sensitive and economical approach to moving orders of all sizes.

Today’s Processes

Fast forward to the present and Major Brands doesn’t give their freight a second thought. They put their deliverables in our hands. That’s the part they like best. They just know things are going to happen as planned — the way a true partnership should work.

The new processes have allowed Major Brands to evolve and we have been in lockstep with them the entire way. They now work with less quantity and more brands. It’s all possible because we listened and leaned in. Technology is great, but we gave them so much more: personal attention and the freedom to concentrate on their business.

Today, they generate a purchase order, indicate Agforce for routing and copy us on the email. From there, it is just handled. The vendor reaches out when the freight is ready for pickup and Major Brands doesn’t have to think about it again.

“It is truly amazing. Agforce has removed the burden of our freight shipping unknowns. We can confidently make purchasing projections, a key in the retention of our business, and know things will deliver the way they are supposed to,” stated Erin. “And if there is a hiccup, Michelle and Chris are on it. They are always looking out for our best interests. The partnership is invaluable to us.”

If your freight shipping could use a personal touch, let’s talk. As an extension of your business, your objectives are ours too. Together, we can customize the right plan for you. 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.

 

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.