An end to the pandemic may be in sight, but many shippers are still feeling its aftershocks throughout the supply chain. Market rates for moving goods remain exceptionally high, making it even more challenging for companies to financially recover after a year marked by shutdowns, delays, and unexpected costs.
So why are market rates so high? Here are a few key trends driving rates up—and some strategies shippers can use to protect their margins and build resilience in the months ahead.
A carrier’s market as backlogs continue
One of the biggest factors influencing market rates right now is the backlog of cargo ships, many coming out of Asia. Global ports are experiencing unprecedented congestion as companies try to catch up after pandemic-induced delays, with volume at the Port of Long Beach, California, alone jumping 43.3% year-over-year. And while many ports are succeeding at chipping away at their backlogs, lines remain long and are expected to stay that way at least through the end of summer.
This chaos has created a carrier’s market, with providers able to charge more and pick and choose the loads they want to carry. Shippers will not only have to fork over more if they want to find capacity on cargo ships, but will likely have to factor delays at the ports into their schedule and budget.
FedEx’s customer cull and LTL capacity constraints
Another challenge facing many shippers right now is capacity constraints within the less-than-truckload (LTL) shipping landscape. Earlier this year, FedEx announced it would cease providing service to around 1,400 customers, a decision that had a ripple effect across the LTL market—leading to price hikes.
For many of the shippers let go by FedEx, finding capacity elsewhere at a reasonable price will be a struggle. The harsh reality is, these were likely customers that were less profitable for FedEx for one reason or another, meaning their loads may be less attractive to LTL carriers they don’t have pre-existing relationships with.
Ongoing driver shortages and rising fuel prices
While some of the reasons for the rising market rates are new, others have been an issue for years—but they’re only getting worse as time goes on. This includes the ongoing driver shortage, which is only exacerbating current carrier constraints. The UK has recently attempted to alleviate this issue by allowing truck drivers to spend a little longer on the road, but many industry experts have compared this move to merely “wallpapering” over the problem, while also noting that it may make working conditions less attractive—worsening recruitment problems in the long term.
Fuel prices are also up. Since these usually account for around 15-20% of overall transportation costs, this is another factor that’s leading to incremental increases in market rates.
Navigating high market rates with sound strategies
High market rates are troubling, but there are steps shippers can take to keep their transportation costs under control.
If there’s one thing recent challenges have taught us, it’s that relying too heavily on a carrier just because you feel comfortable with them can be risky. We recommend diversifying your carrier network to ensure that if a provider folds or cuts you, you won’t have to scramble to find capacity. Increasing the rate at which you conduct RFPs can help with this, allowing you to build relationships with more carriers and access more competitive pricing.
At CTSI-Global, we help the companies that partner with us to conduct more frequent and frictionless RFPs, while also providing access to our 20,020-strong network of trusted, pre-vetted carriers. What’s more, we can help you to benchmark your shipping rates against the market to assess whether your costs are reasonable—empowering more informed decision-making.
Don’t let rising market rates burn your bottom line. Contact us today.