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Why Working with a 3PL During Times of Volatility Makes a Ton of Sense

posted in 3PL, Less Than Truckload by

Over the past two months, volatility erupted in the transportation market as supply chain and subsequent market rates were disrupted by the binge-buying of consumers trying to prepare for the stay-at-home mandates of their states. High demands prompted President Trump to exempt carriers hauling relief goods from Hours of Service (HOS) restrictions, first until April 12 and currently extended to May 15. April volumes should rival those of early 2009.

Working with a 3PL can Help During Volatile Times

 

There has been some decrease in outbound freight volumes since earlier in April, as consumers have felt more prepared to deal with the impact of the coronavirus, yet April shipment volumes are expected to be similarly low to those of early 2009.

Generally speaking, when shipping volumes rise and there’s less trucking capacity, carrier rates increase; when there’s less volume and more capacity than necessary, carrier rates decrease. However, all freight carriers are not impacted equally during this pandemic and general reductions in fuel prices and demand aren’t always translating to lower carrier costs across the board. While retail volumes aren’t expected to change much, a nearly shut down food service industry and slower production of non-essential manufactured goods mean far less volume in those areas and inevitable fluctuations in pricing and markets. Freight volumes for meat products are also decreasing due to the closing of several major plants after their staffs were hit with COVID-19.

According to the Cass Freight Index, which has been measuring the North American freight market since 1995, transport pricing could stay low through May with continued volatility. While volume has increased for the high demand categories of consumer staples, groceries, e-commerce and home improvement, it has plunged dramatically for auto, shopping mall retail and the restaurant industry, leading to much less freight to move.

Higher than usual unemployment rates as well as buying patterns disrupted by social distancing make it hard to forecast demand, creating an uneasy situation for both carriers and shippers. And shipper inventory is all over the map – some shippers’ warehouses are nearly empty, some have their inventory lingering in ocean containers, and others have full warehouses. Despite these uncertainties, Cass data shows that rates could be driven higher later in the year with lower capacity and possible restocking, and even destocking when the economy inevitably re-opens and weekly volumes begin to rebound.

Navigating the currently fluctuating transportation environment can be smoother when partnering with a 3PL provider like Amware whose proprietary, web-based 3PL software platform Amrate can identify, from an extensive carrier network, the lowest cost carrier for your freight shipping needs while consolidating all freight quoting. Click below to request a free 30-day trial and start saving on your LTL and FTL shipments today.

 

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14 Apr, 20

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