Navigating Tight Capacity, Higher Freight Shipping CostsWritten by Neal Willis
As we enter into the busy period of shipping ahead of peak retail season, shippers are facing tight market conditions where, for a change, the environment is more favorable for the carriers. Capacity, higher freight shipping costs and reverse logistics are just a few issues in the marketplace that shippers are having to address.
In the coming months, expect to see a shift in responsibility from procurement and purchasing departments back to warehouses and transportation departments where it belongs. Purchasing departments have mistakenly treated freight like a commodity for quite some time. Freight is not a commodity, but it is a finite resource, meaning there is only so much capacity to go around. Different freight carriers provide different levels of capacity and service—and you get what you pay for.
With fewer qualified drivers than needed to meet demand and driver pay not yet high enough to attract the talent needed to fill the gap, there’s no doubt that freight shipping costs will continue to rise. Carriers can’t and won’t shoulder the costs alone to hire and pay drivers and other much-needed personnel.
Just as individuals have a penchant for certain things when given a choice, freight carriers also have their own preferences for certain types of freight and shipping lanes. Some freight looks more attractive to a carrier than others, like properly packaged shipments as opposed to loosely shipped items, not on pallets. Whether it’s proper packaging or some other factor, carriers will pick up the most appealing freight first, and, in a market where capacity is already tight, this means that some shippers could be in trouble.
Along with the shift in responsibility from purchasing back to the warehouses or transportation departments, freight is garnering the attention that it deserves from executives. Transportation and warehouse personnel have long known that freight is not a commodity, but executives and mid-level managers looking to make a name for themselves have treated it as such. They’ve pitted carriers against themselves with ruthless freight rate negotiation tactics designed to squeeze carriers for every possible penny. Unfortunately, in many of those cases, once successful and mutually beneficial carrier and shipper relationships have been damaged beyond repair because of it.
To secure capacity, shippers will find they will need more of a partnership approach to their carrier counterparts, and that approach involves more than just money. Shippers must learn to be more flexible to carrier needs and willing to change their own schedules accordingly. Rather than carriers jockeying for a shipper’s business through competitive pricing, shippers are now competing to earn the carrier’s business through committed capacity and cooperative operational practices. Simple things that have long been taken for granted, like making hours of operation easily displayed for carriers to see, will sometimes go further than any dollar.