It’s both an interesting and rather chaotic time in the intermodal market. The ELD mandate is in full effect and there have been some widespread market changes as a result. For carriers, with the new ELD regulations come subsequent training needs and changes to drivers’ hours – creating a number of additional costs for carriers, which are in turn being passed along to shippers. So, what can shippers do to combat the ongoing market challenges of 2018?
Shorter Routes and Added Costs
According to the Journal of Commerce, the ELD mandate is “making a bad situation worse for shippers, forcing the latter to pay more, speed up loaded and unloading, and dig deeper into routing guides to find capacity.”
Due to the restrictions placed upon carriers by ELDs, the farthest freight from the ramp is being scrutinized in the drayage community, and these carriers are exercising choice when it comes to longer haul lengths. This is having a direct impact on capacity and rates, and rates on length of haul are steadily increasing – the drayage space is seeing cost increases from 3-10% that are purely associated with the ELD mandate.
Additionally, carrier preference has swung toward local freight (i.e. within 100 miles), which has caused a strain in some markets. From a carrier perspective, if a driver has a longer route and has to take an overnight due to the ELD mandate, that automatically increases the carrier’s cost for that particular load. Truckload routes are getting shorter as a result, and shippers with longer routes may need to turn increasingly to rail and intermodal options.
Shipper of Choice Becomes More Important
Today, more shippers are placing additional focus on aligning their efforts with their carrier partners in order to improve transportation efficiency and better position themselves to secure capacity in the tight market. Being “carrier friendly” is extremely important in a capacity crunch – for example, shippers that aren’t as friendly, require extremely long load times, or keep the strictest possible appointments may be feeling the brunt so far this year.
From a rail perspective, it has been a shipper market for years, but that is beginning to change. There have been significant rail increases recently – some modest, others in double-digit percentages. And when coupled with dray increases, this becomes a perfect storm of higher costs. Shippers are now seeing widespread increases of 3-15%, and every intermodal move is going up in price to a degree.
Ways to Fight Cost Increases
In light of these increases, we’re encouraging our customers not to revert back to OTR, which may be higher in cost and come with extra charges, and additional OTR traffic will exacerbate the capacity shortage. Rather, it’s important to try and find cost savings in other ways; this includes being flexible to mitigate costs where you can. For example, can you ship on different, cheaper days of the week? Can you look to benchmarking your organization against the market to put you in a better position to control accessorial costs?
To try and keep costs down in the current capacity market, shippers should also be identifying how they can be more diverse in mode to keep their network fluid. This not only encompasses OTR/intermodal, but also railroads. For example, when rail providers look to reduce costs by canceling routes, companies may be left scrambling to move freight a different way.
It’s important for shippers to know that these ongoing capacity issues are going to continue, and we see this tumultuous landscape becoming the transportation norm. A non-asset provider can help absorb loads and divert traffic from one railroad to another to give customers an alternate choice when disruptive events occur. The fact remains that costs are not going away in 2018 – there’s no indication of rate savings on the horizon, so it’s important to be prepared.
Learn more about Transplace intermodal solutions here.
How is your organization battling rate increases in 2018?