Updated news on the ongoing ILWU-PMA contract negotiations remains scarce. The ILWU and PMA issued a joint press release on July 26th announcing a “tentative” agreement on the Maintenance of Health Benefits, subject to agreement on other issues in negotiations. At this time, that was the last jointly issued statement. Of deep concern for importers is the disruption a work slowdown or work stoppage could cause to their supply chains as U.S. ports get back to normalcy. While port operations are working toward normalcy, the terminal operation is still backlogged as older containers are being cleared to their final destination.
The average truckload rate cost per mile is showing significant leveling with August staying flat from July’s average rate of $2.85. Similarly, Rockfarm’s index lanes reflect the same with the hub index nearing last year’s cost per mile of $2.96. The Rockfarm border flow index has shown the same downward trend through 2022 with a slight uptick in rates in the past month as congestion continues to tighten capacity. Spot market shipment opportunities have dropped significantly through the first half of this year as contract lanes take hold with shippers contracting lanes on shorter contracts of 30 days to 90 days.
In alternative energy news, the headlines are captured by Nikola and Tesla as they go head to head in capturing the electric commercial truck market. With port and rail congestion showing just how badly a supply chain can be disrupted, you can bet long-haul trucking is not going anywhere soon. What is interesting is the hydrogen fuel cell systems are being deployed out of the spotlight, but very much in the mainstream of our supply chains. Hydrogen-powered forklifts are gaining a market share as complete hydrogen systems are integrated into large warehouses. Productivity and a lower total expense are driving greater demand.
We have entered new territory with the Rockfarm average cost per mile dropping below last year at this time, finishing July at an average cost per mile of $3.06. Midway through August we continue to see a decline in cost per mile to $2.94. With diesel’s continued reduction
in price, we expect to see the overall cost per mile continue to slowly decline alongside the drop in diesel cost even with the average line haul rate holding flat over the past couple of months.
As we review the Rockfarm CPM Index illustrated below, there is little doubt freight cost was a key challenge in 2021. As both truck and ocean rates head lower to more acceptable levels, you can be certain carriers are doing everything they can to maintain rate levels. For many shippers that may utilize non-asset providers to secure capacity, the struggle ensuing is twofold. The first is non asset providers fighting to maintain margin per bill, while shippers are seeking the bottom for spot rates. At a minimum, shippers want to identify the true cost to secure capacity in the market.
These competing priorities are playing out in a number of ways. The first is greater connectivity between transportation planning software and participating carriers, forwarders and brokers alike. Shippers are seeking the best rates and the path to secure the best rates can come through the delivery of API rating. API rating gives the shipper instant rates to clearly see the competitive landscape when hosted within a transportation management system. Couple competition with the ease of engagement with API rating, and shippers now have visibility to minimize the impact to their shipment planning process. Secondly, is the traditional approach of holding rates for shorter periods of time, such as 30 to 90-day contracts. This is a great process to begin seeing the trends within each lane as carriers compete. The critical element is competition. Often shippers are reluctant to add any new blood to their RFP exercises resulting in false positives. Carriers, forwarders and brokers get comfortable in the lanes awarded and, instead of competing for your business, they turn their focus to other customer channels that complement their overall growth initiatives.
Editor’s note: Today’s TMS market continues to grow. The landscape in which it grows is changing as more and more of the due diligence is focused on the shipment cycle vs the order life cycle. This separation tends to keep the visibility brought forth by a TMS in a vacuum resulting in missed organization improvements.
“Transportation System software is a business necessity.”-Logistics Manager, global food shipper
For more information please reach out to our Supply Chain Coach team.
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.”
Kingsont, John. (2022 August). ATA survey: Truckload drivers in ’21 earned 18% more than 2 years earlier.
Leslie, Alex. (2022 August). ATRI’s Newest Operational Costs Research Documents Costliest Year in Trucking.
Bloomberg. (2022 August). Tesla and Nikola Big Rigs Race for Up to $40,000 U.S. Incentives