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truckers

Accelerating Business Growth And Lowering Cost With Data Analytics

Too many companies are experiencing transportation and freight expenses as one of their top three costs. Smaller companies feel the pinch the most. They typically incur greater logistics costs than medium and large sized companies, as do companies that sell lower product value goods. In a recent survey, 32% of online retailers expected logistics and delivery to be their biggest cost this year. The expense of moving products or assets to different destinations should not be the leading cost in any business, if possible. (See How Does Freight and Transportation Fit into your Budget? 

What’s behind the dramatic rise in transportation costs in nearly every sector? There are simply not enough drivers on the road to keep up with demand.  

Truck Capacity Crunch 

The first explanation for the rise in transportation costs is the truck capacity crunch.

The first explanation for the rise in transportation costs is the truck capacity crunch. See “Rising Costs and Lower Capacity in the Domestic Truckload Market.” There are simply not enough drivers on the road to keep up with demand. “Surging transportation demand is spurring trucking companies to charge as much as 30 percent more for long-distance routes compared with prices a year ago, and they’re hard pressed to add capacity because of a long-standing shortage of drivers,” explains Thomas Black, in Bloomberg’s “There Aren’t Enough Truckers, and That’s Pinching U.S. Profits.” Tyson Foods Inc anticipates paying $200 million more for freight in 2018 from the previous year. Kellogg Co’s logistics costs are expected to rise by nearly 10 percent. 

Chief Executive Jim Snee of Hormel Foods, the maker of Skippy peanut butter and SPAM, says, “We don’t believe we’re going to recoup all of our freight cost increases for the balance of the year.” He informed Reuters that the company’s operating margin sank to 13.2 percent, from 15.6 percent due to rising costs – freight among them – in the most recent quarter. 

Stringent Demands of the ELD Mandate 

The second reason is the new ELD (Electronic Logging Devices) Mandate which entered into force on December 18, 2017.  Drivers are now driving less, in keeping with the new regulations. Fewer drivers on the road at any given time due to the ELD Mandate is equivalent to taking 200 to 300,000 or so trucks off the market, according to a podcast episode by Freight Savings Tips.

Truck Driver Wage Increase

With fewer people getting licensed to become truck drivers, and older drivers retiring (see “Attracting the Next Generation of Truckers”), it will be inevitable that wages will need to go up to attract much-needed drivers. To cover the cost of truck driver wage increases, truckload rates will inevitably rise. 

Fuel Price Hikes 

The rise in fuel prices is especially hard-hitting for companies as fuel represents a significant portion of freight spends – often appearing as a surcharge on carrier invoices or embedded in line-haul rates. Fuel, according to the Harvard Business Review, is often the “largest inadequately monitored part of a company’s cost structure.” 

Tom Kloza, global head of energy analysis for Oil Price Information Service calls this season “the most expensive driving season since 2014.”  

Congestion In Cities 

With increased traffic volumes and customer expectations on delivery times, the pressure to perform – quickly, and in congested parts of the city (i.e., tricky navigation) is very real. Consumer changes and complicated last-mile delivery obligations require money which must then be offset elsewhere. 

The main solution – and greatest hope for companies engaged in shipping activity –  is data analytics.

What To Do: It’s All about Data Analytics 

The main solution – and greatest hope for companies engaged in shipping activity–  is data analytics. Data analytics lessen the cost of bringing products to retailers or customers by uncovering new possibilities.  

Transportation spending covers many dimensions. Therefore, there are many opportunities to control the spend. These solutions come in the form of reconsidering warehouse processes, leveraging IT systems, revising package and product designs to alleviate excess weight and increase shipment density, or “nearshoring” (reducing the number of miles shipments travel). 

Bringing in the Experts

Companies who have relied on BlueGrace’s tried-and-true data analytics have recouped losses from mistakes they have made in the past. Consider the consumer packaged good company that underwent BlueGrace data analysis to determine what the “true cost” of its orders were (using information from historical orders) when freight cost was allocated.

The company executives were able to “drill down and allocate a freight cost to not only the customer level but the customer location, customer location type (Direct to Store or Distribution Center) and even down to the SKU level.

The company executives were able to “drill down and allocate a freight cost to not only the customer level but the customer location, customer location type (Direct to Store or Distribution Center) and even down to the SKU level. Since freight cost was not passed through to the client, this would either show a net margin loss on certain orders or opportunities to reduce the freight cost allocation on others to become more competitive. The result highlighted regions that were more costly to ship to, products that did not have enough margin potential to consider shipping unless they met a specific minimum requirement and insight into regions of the country that would benefit from an additional warehouse location.” 

With BlueGrace’ specialized business intelligence, processes become clearer. Transportation costs are curbed relative to sales and overall budget. Ready to find your own clarity today? Feel savings relief by taking the first step. Watch the video on our proprietary game-changing data service here and talk to an expert today. Fill out the form below or call 800.MY.SHIPPING (697-4477) to be connected to a Transportation Management Expert. 

The End of NAFTA Could Be a Nightmare for Truckers 

Recent actions from the U.S. President, Donald Trump, have truckers more than a little concerned. During his time on the campaign trail Trump has made his opinion on foreign industries, Mexico in particular, very clear. Touting his “America First” slogan, Trump promised the American people that he would focus on bringing jobs back to the United States and would renegotiate trade agreements to put the U.S. in a better position.  

While that sounds all well and good, the actual ramifications of Trump’s trade tinkering could be disastrous.

While that sounds all well and good, the actual ramifications of Trump’s trade tinkering could be disastrous. He’s already threatened higher tariffs on trade with Mexico and now the president has his sights set on another target, solar energy. His most recent legislative move would place a 30 percent tariff on any solar equipment that is manufactured outside the United States.  

According to Bloomberg, the 28 billion dollar solar industry is heavily reliant on these outsourced parts. In fact, 80 percent of its supply chain is centered around the acquisition of them. Bloomberg also says that this doesn’t just affect the renewable energy industry, driving it to the point of being cost prohibitive, but it could also cause 23,000 Americans to lose their jobs. The tariff would not only target solar panels, but a number of consumer electronics and the steel industry. It’s highly likely that these tariffs could create restriction on US-made goods in other countries.

Truckers Fear of NAFTA Ending 

The North American Free Trade Agreement has been a crucial element for the U.S. economy since its implementation back in 1994. The agreement was aimed at reducing or eliminating tariffs and other trade restrictions between partnering countries; Mexico, Canada, and the United States. As partner countries are attempting to work together to renegotiate the deal, the process is being dragged down with “contentious negotiations” and threats of an all-out withdrawal by the United States.  

While many in the industry will agree that the trade agreement is due for some updates and renegotiating, it is Trump’s critical attitude toward these trade agreements that have the freight transportation industry concerned.  

“NAFTA has been a major point of contention since it was first implemented over two decades ago. Critics have argued the trade deal has benefited large corporations or foreign workers at the expense of domestic workers. But to industry groups, the trade deal has been vastly more beneficial than not,” says an article from Transport Topics 

The trade agreement has been very helpful in opening up the markets between the three participating countries and has been a driving force in the success of the trucking industry. With over $6.5 billion in annual revenue for the industry, NAFTA is responsible for creating jobs for over 46,000 people; 31,000 of which are U.S. truck drivers.  

Restricting foreign trade in certain circumstances could hurt both domestic companies and consumers by limiting the flow of goods they might rely on

“President Trump hopes to use trade and other reforms to encourage domestic production – which could result in more jobs. But some domestic production faces barriers that other countries don’t have. Restricting foreign trade in certain circumstances could hurt both domestic companies and consumers by limiting the flow of goods they might rely on,” Transport Topics adds.  

The Fallout from the Death of NAFTA  

So what would happen if the United States were to withdraw completely from the free trade agreement? Most agree that the results would be disastrous.  

The disagreements and heated rhetoric have fueled concern throughout the economy. Many businesses rely on the massive trade deal, which could make them vulnerable depending on how the negotiations end and create uncertainty in the process. Alliance of Automobile Manufacturers Federal Affairs Vice President Jennifer Thomas notes that there are two bad outcomes that could potentially come from these talks. The first of these scenarios is that NAFTA becomes unworkable and useless due to unrealistic expectations. The second, and potentially most frightening, is we simply lose NAFTA altogether because the U.S. has pulled out entirely.  

The trucking industry could stand to suffer the most, as transportation from the U.S. to either Canada or Mexico is predominantly done by trucking.  

It’s more than just the threat of higher tariffs that would hurt American consumers, who would end up taking the brunt of the increased costs. There are a significant amount of jobs at stake, all of which are heavily reliant on NAFTA. The trucking industry could stand to suffer the most, as transportation from the U.S. to either Canada or Mexico is predominantly done by trucking.  

According to a report released last December by The American Action Forum, a center-right nonprofit, pulling out of NAFTA would increase consumer costs by at least $7 billion and businesses would be hit with $15.5 billion in new tariffs.  

As NAFTA negotiations are still ongoing there is hope that the trade agreement will make it through. However, with the Trump administration avidly arguing against it, there’s really no telling what form the trade agreement will take in the end.

How Can A 3PL Help?  

While we can’t control national policy, we can help our customers navigate through it. When retail stores added ‘Must Arrive By’ Dates, we were able to offer solutions. When Walmart went a step further and tightened their delivery rules with OTIF (On Time In Full), we successfully assisted many of our retail customers. With the ELD mandate in full effect, we’re actively helping our customers navigate issues that cause capacity and expensive penalty problems. No matter the situation, we are the experts here to simplify your freight needs. If you have any questions about how a 3PL like BlueGrace can assist, feel free to fill out the form below: