Data is the most sought-after commodity within trucking as shippers and carriers grapple with forecasting truck rate fluctuations for budgeting and strategic decisions. The challenge for asset carriers is knowing when and how much of their capacity should be contracted. On the shipper side, going to bid and securing contracted rates provides budgeting and security on knowing you have sewn up a percentage of your needed capacity.
The pandemic has presented challenges to any well-defined procurement strategy. As a result, limiting exposure to the spot market becomes paramount. This is where your procurement strategy, with assets and non-assets, plays a big role in your success to stay aligned with your freight expense budget and secure the needed capacity your company will need.
Deeper transparency with your carrier partners is required. The transparency gained should not be a barrier to staying informed. Staying knowledgeable on new technologies and business models that continue to shape the truckload market is essential to understanding if your carrier partner’s operation aligns with your supply chain. To start the conversation, a firm understanding of a carrier’s expense can support your questions regarding lane profile, percentage of the non-contract business, broker use percentage, and internal commitments such as driver home time. Understanding your carrier partners opens the door to better partnerships and mitigates risks to your success. For further discussions on fleet operations please reach out to firstname.lastname@example.org.
January’s fuel index rose to $2.69 per gallon which wasn’t enough to keep the momentum on truckload rates continuing lower. The Rockfarm index for January fell to $2.57 a mile, compared to the year-end average of $2.65 per mile. The cost of diesel continues to climb with the U.S. average now at $2.80 per gallon through the first week of February.
Fueling the rise in diesel is the cost of U.S. crude which jumped 7% on Friday. Demand for crude is being driven by economic activity as countries continue to open up from the pandemic.
The EIA (U.S. Energy Information Administration) has raised its forecast for 2021 showing average barrel cost rising from $50 a barrel to $56 thru the 1st quarter of 2021.
Trucking rates continue to settle with the Rockfarm Market Indexes illustrating weekly fluctuations while still within a static range since mid-January. Capacity challenges will not be going away as month end and regional shipment traffic will continue to present challenges to shippers to secure truck capacity.
Economic indicators are showing increased strength throughout 2021 with many experts now revising their GDP forecast to as high as 6.8%. What this means is another bumpy road ahead for shippers as capacity constraints remain a top challenge.
The National Motor Freight Traffic Association (NMFTA) is a non-profit membership organization, consisting of motor carriers engaged in interstate and intrastate commerce, and publishes the National Motor Freight Classification (NMFC). The NMFC standardizes commodity descriptions hauled by member carriers. The NMFC is the basis for freight class application and is used primarily within the Less than Truckload (LTL) industry. With 582 carrier members, the NMFTA is an advocate for LTL carriers, providing research and positions on regulations, safety, security, infrastructure and other challenges faced within trucking.
The NMFTA holds three public meetings per year to discuss proposals to amend the NMFC. Changes to the NMFC are brought forth by members as well as shippers. A change to the NMFC can impact negotiated pricing that may result in an increase when an amended commodity is defined as a new freight class.
As an example, the February 9, 2021, meeting reviewed 40 proposed changes to the NMFC. One proposed change included Docket 2021-1 which would unilaterally change the density table for over 137 NMFC items. The items brought forward are reviewed and voted on for amendment to the NMFC. Statements of position are requested from the public and reviewed prior to ruling on each proposed change. A requested change may be approved as modified or withdrawn.
Understanding the impact of such changes is critical to each shipper’s pricing program. In the case of docket 2021-1, the amendment was withdrawn. Illustrated to the left are two examples where docket 2021-1 would have had a large impact on LTL pricing. To review a copy of the Rockfarm rebuttal letter and upcoming changes to the NMFC please visit the NMFTA website. The NMFTA will also post proposed changes to the NMFC for public review at www.nmfta.org.
Example #1: Item #51140
Current Scenario: 2 pallets @ 833 lbs
48x48x48 = 6.5 pcf (Class 125,
Current Cost: $436.27
Proposed Scenario: 2 pallets @ 833 lbs
48x48x48 = 6.5 pcf (Class 150,
Proposed Cost: $521.51
18.4% rate increase
Example #2: Item #53025
Current Scenario: 2 Cartons @ 340 lbs
32x42x96 = 2.28 pcf (Class 250,
Current Cost: $192.75
Proposed Scenario: 2 Cartons @ 340
lbs 32x42x96 = 2.28 pcf (Class 300,
Proposed Cost: $308.96
37.6% rate increase
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”
William B. Cassidy, (2021 February). Yellow consolidating brands into “super-regional” LTL carrier. https://www.joc.com/trucking-logistics/yellow-consolidating-brands-‘super-regional’-ltl-carrier_20210205.html
Greg Knowler, (2021 February). Maersk posts $2.9 billion 2020 profit, expects even stronger 2021 https://www.joc.com/maritime-news/container-lines/maersk-line/maersk-posts-29-billion-2020-profit-expects-even-stronger-2021_20210210.html
William B. Cassidy, (2021 January) UPS Freight sold to Canada’s TFI for $800 million https://www.joc.com/trucking-logistics/ltl-trucking-logistics/ups-freight/ups-freight-sold-canada’s-tfi-800-million_20210125.html
Max Heine, (2021 February). The tens of thousands of drives with drug violations likely to leave trucking for good. https://www.overdriveonline.com/regulations/article/15042924/thousands-of-drivers-with-drug-violations-may-leave-trucking
The Maritime Executive, (2021 February). Retail Imports Expected to HitMonthly Records in 2021. https://www.maritime-executive.com/article/retail-imports-expected-to-hit-monthly-records-in-2021
Fareeha Ali (2021 January). US e-commerce grows 44.0% in 2020. https://www.digitalcommerce360.com/article/us-ecommerce-sales/