Last month we spoke on the rate per mile carriers seek to maximize utilization of their fleets with the end goal to keep the wheels moving in their operations. This month, we will explore challenging rate conditions and how execution strategy with alignment to the right asset and non-asset partners can pull your supply chain service to a new level. Identifying available truck capacity has been challenging the past four weeks as major shippers buy capacity through their core asset providers and deploy aggressive efforts to secure market capacity through their non-asset providers.
As we can see within the Rockfarm opportunity index to the right, the loads available index has steadily increased from the its low point in April of 2020 to its high mark prior to the holidays. Q1 has maintained the holiday surge in volume and, by all accounts, will finish the quarter strong. As Q1 rolls to an end, orders must be shipped and cleared from already congested distribution centers. Due to capacity tightening, carrier commitments should be confirmed to ensure the committed volume of trucks will be there at the time of tendering.
In addition to asset partners, shippers are looking toward their non-asset partners (brokers) to identify viable solutions that secures the capacity required to meet their customer requirements. In times of tight capacity, the last thing you want is your brokers fighting over the same truck availability, inadvertently inflating the market rate within the available capacity. Smaller carriers in the 1 to 5 truck fleets are very keen on the rate indexes and know movement within the load postings illustrates a shipper needing capacity. Multiple postings of the same loads is a great indicator that the market rate will keep going up, giving small fleets an opportunity to increase their rate per mile cost to the truck brokers.
There are strategies that can be deployed to secure the additional capacity required, while still keeping yourfreight expense in check. Transparency with your brokers can extend your internal logistics team and tap into the small fleet market comprising 55% of the total truck count in the U.S. Transparency requires pricing framework, rules of engagement and accountability.
- Pricing Framework: includes minimum and maximum margin applied to the load and an agreed upon margin %
- Rules of Engagement: limit the number of brokers in the initiative to leverage their approach in the market and keep inflationary truck pricing from taking hold
- Accountability: ensure you, as a shipper, have full visibility of each load cost and margin created by the broker along with an accountability measurement, such as a buy rate index, evaluated against a specified index
FOR MORE INFORMATION, PLEASE REACH OUT TO INFO@ROCKFARM.COM.
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