Insider Blog

Reading the supply chain trends: Are lower freight transportation rates for shippers and 3PLs around the corner?

Tight freight capacity throughout the supply chain in 2018 followed by a pause in trucking demand early in 2019 has led many logistics providers and shippers to reevaluate and expand their transportation provider pool. 

According to a recent Old Dominion Freight Line earnings call, ODFL CEO Greg Gantt said that while the pricing market is still stable, there is “evidence that competitors are losing their discipline.” 

In prepared comments, he elaborated that, for now, LTL pricing is strong, and capacity is tight. “The consistent increase in our LTL revenue per hundredweight reflects the favorable pricing environment as well as the decrease in our LTL weight per shipment,” he said. “Customer demand continues to be favorable, however, and the domestic economy continues to show strength. We believe these factors should support further opportunities for us to win market share and produce profitable growth in 2019.”

So while carrier pricing is stable for the time being, there are signs that the rest of 2019 could bring about a different reality. Even a perceived loosening of rates is a signal to transportation buyers throughout the supply chain. If ODFL customers are currently finding carriers willing to use higher discounts to attract business, other carriers are also seeing the same from LTL shippers, and this means a significant trend might emerge.

“We’re seeing our customers shop because they think the environment is favorable for getting lower rates,” he reportedly said on the call. 

SMC³ has also witnessed an increase in LTL bid activity generated through its BidSense® product, an application that automates the transportation procurement process. More LTL customers have utilized Bid$ense during the first few months of 2019 than in the entire year of 2018.  Customer interest has not waned suggesting bid activity will remain high throughout the coming year.

“I expect bidding to ramp up further throughout 2019 and into 2020, and that means shippers and 3PLs will likely also be shopping for technology to assist with their bids,” said Brian Thompson, SMC³’s CCO. “While savings are important to shippers and logistics services providers, these buyers are also seeking to expand their provider base to ensure future capacity in advance of the next crunch.”

Of course, bidding on transportation is a two-way street. Shippers and 3PLs have to find the right partner to transport their goods, and carriers need to make sure the freight fits with their business model. Thompson suggested there are a number of simple steps shippers can take to make sure they provide attractive bids to carriers and to start developing a lasting symbiotic relationship with those providers.

“Anything shippers can do to help make carriers more efficient will help establish a lasting, worthwhile partnership. Shippers should know which carrier prioritizes what freight type and also know that the expectations they set during the bidding process have to match the reality of the freight,” he said.

“Turning yourself into a shipper of choice in this market is extremely important,” Thompson continued. “This way, you can ensure you always have capacity when, and where, you need it the most.”

Transportation leaders from shippers, carriers, 3PLs and other industry stakeholders will no doubt be talking about bidding in the current market during the next SMC³ conference, Connections 2019.

“Regularly scheduled bid events should be a part of every transportation manager’s strategic plan to closely monitor market prices and ensure they have the proper mix of providers available to meet their supply chain needs,” Thompson said. “In order to get the most out of the procurement process, transportation managers should leverage the technology on the market today.”  

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Categories: LTL, Supply Chain