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Outlook for LTL in 2021: A Pressurized Sector

The height of the COVID-19 pandemic forced many businesses to close their doors, in some cases for good. In March and April, during the early days of the “shelter in place” order and red phase, the less-than-truckload (LTL) sector saw a considerable drop in volume, as much as 20 percent.

Within a few months, freight volumes rebounded quickly, leaving carriers struggling to move freight.

Trucking firms, in an effort to keep their own doors open, issued extensive layoffs to compensate for the loss of business. However, within a few months, freight volumes rebounded quickly, leaving carriers struggling to move freight. So much so that some companies had to turn away new business in favor of trying to hire new drivers.  

“All the carriers I talk to are looking for another 100 to 500 drivers,” Satish Jindel, president of transportation research firm SJ Consulting Group, said in an interview with the JOC. “The trucking industry is short 2,000 or more drivers just on the LTL side. That tells you demand is robust. This is a great time for the whole industry and LTL carriers should be operating better in this environment.” 

It is indeed a profitable time for LTL carriers, especially as the demand for e-commerce continues to swell. XPO Logistics, the third-largest stand-alone LTL carrier in the United States, had to lower its adjusted LTL operating ratio to 79.7 percent in Q3, while Old Dominion Freight Line, the second-largest LTL carrier company, lowered their’s down to 74.5. This means that these carriers saw operating profit margins upwards of 25 percent, while most publicly owned LTL carriers are working with operating margins below 10 percent.  

“If XPO and ODFL can do this, there’s no reason others should not be able to,” Jindel says. “The LTL industry should be printing money right now; demand is exceeding capacity.” 

As with other modes of freight transportation, LTL contract rates will continue to climb, but not at the same rate as truckload pricing. LTL shippers and carriers should be expecting increases to remain in the mid to high single digits, whereas FTL freight is seeing double digits. As LTL volumes continue to rise, freight pricing will continue to stay steady throughout the year.  

Jindel said LTL operators “need to get their finances in order so they can reinvest in what’s going to be needed” in 2021. This means hiring more drivers, ordering new equipment, and investing in new technology.  

Beware The Bottlenecks

As it stands, capacity is tight, regardless of what mode a shipper decides to use, be it LTL, FTL, drayage or intermodal rail. Shippers are struggling to find the right fit for their freight needs, even more, to make sure the customer receives that freight on time.  

While the increase in demand makes for lucrative contracts, an overabundance of capacity is just as bad as too little if there isn’t enough equipment to move it.

While the increase in demand makes for lucrative contracts, an overabundance of capacity is just as bad as too little if there isn’t enough equipment to move it. This is being seen it two distinct problems. The first being the pervasive driver shortage in the United States. There simply aren’t enough drivers to fill the number of open seats behind the wheel, which leaves carrier companies competing over the same limited resource.  

The second issue is the amount of time it takes for a trailer to be unloaded. With the massive influx in demand, most big-box retailers are getting more trailers in faster than they can be unloaded, which is problematic. As most LTL carriers have a limited amount of equipment, every trailer that is tied up, waiting to be unloaded, shrinks the total amount of available capacity. 

Shippers Need To Start Planning  

Despite the vaccine rollout, there is no telling how much longer we will continue to experience COVID-19 restrictions. This means that pressure on LTL prices will continue, which could affect shipping budgets.

Unfortunately, due to how turbulent and unprecedented 2020 was, data from years prior is of limited help, shippers will basically have to figure out their shipping budget on the fly this year as we continue to navigate uncharted territory.

As e-commerce demand continues to grow, it is likely that many shippers will continue to see delays in their deliveries, which could be problematic if operating under tighter deadlines or restrictions such as OTIF policies.

In addition to higher prices, shippers will also have to factor in delays, as many carriers are struggling to keep up with the workload. As e-commerce demand continues to grow, it is likely that many shippers will continue to see delays in their deliveries, which could be problematic if operating under tighter deadlines or restrictions such as OTIF policies.

While capacity will remain a challenge, shippers do have some options available to them. One of the best methods is to work with a third-party logistics (3PL) provider. As a leader in LTL, BlueGrace can help you to find the capacity you need when you need it. Contact one of our experts today to get a quote on your next shipment.

Carrying the Cure: The Logistics Of The COVID-19 Vaccine

The first wave of the COVID-19 vaccine has rolled out into communities. First-responders and those who work in high exposure professions are first on the list to get the shot. The two major distributors for the vaccine in the U.S. are Pfizer and Moderna. According to the CDC, the Pfizer vaccine “will arrive at a temperature between -80°C and -60°C (-112°F to -76°F)” and the Moderna vaccine “will arrive frozen between -25°C and -15°C (-13°F and 5°F)”.

Transit Priorities 

In addition to temperature-control needs, freighters will feel the crunch with capacity related constraints. Labeled “Operation Warp Speed” by the United States government, there is pressure on the labor force to transport these doses without delay or damage.  

Security and labor are another consideration companies need to make when meeting this unprecedented need for refrigerated shipping.

Security and labor are another consideration companies need to make when meeting this unprecedented need for refrigerated shipping. According to WSJ, “carriers typically use two-driver teams for such shipments to keep trucks moving and ensure valuable cargo isn’t left unattended.” Of course, this also increases costs by needing to pay a two-driver team for every shipment.  

Monitoring Temperature 

Temperatures need to be checked regularly and recorded each day to account for any excursions. For the most accurate readings, the CDC recommends using a DDL (digital data logger) with a detachable probe.  These probes should be buffered. Teflon®, sand, glycol and glass beads are all appropriate buffering materials for the temperatures required. According to CDC guidelines, monitoring temperatures should include “a temperature log and one of the options below:

  • Option 1: Minimum/Maximum Temperatures (preferred) Most DDLs display the minimum and maximum (min/max) temperatures. Check and record the min/max temperatures at the start of each workday. 
  • Option 2: Current Temperatures –  If the DDL does not display min/max temperatures, check and record the current temperature at the start and end of the workday. Review the continuous DDL temperature data daily.”

For the recommended storage log in Fahrenheit, click here.  To access the CDC recommended Celsius log, click here.

Projected Numbers

Recent estimates show that the number of doses the U.S. has signed up for will require about 632 trucks in 2021. Those numbers have room to grow.  Such narrow error margins with temperature mean replacement orders will happen. Security issues will arise, and the FDA will approve more manufacturers. Unforeseen events have already taken place, like the Wisconsin pharmacist who allegedly ruined a shipment of vaccines under his care.  

It is plausible to assume shipping demands will increase due to the Defense Production Act to expedite the delivery of 100 million vaccines during the first 100 days of President Joe Biden’s incumbency.  

According to information gathered by Heavy Duty Trucking, “WHO estimates nearly 20% of temperature-sensitive healthcare products get damaged during transport, and 25% reach their destination in a degraded state because of breaks in the cold chain”. While these are the present industry standards, the stakes are higher for a vaccine that will prevent a viral infection.

Managing Changes 

Presently, the number of trucking companies with both the equipment and the experience to handle the demands of this roll-out is a small percentage of the industry.  

In an interview with Wall Street Journal,  “Robbie Neilson, chief operating officer of Cavalier Logistics, a freight transport company based in Northern Virginia that specializes in temperature-controlled logistics and is involved in the Covid-19 vaccine distribution efforts” offers his opinion that the industry is well-equipped to handle the challenges. He admitted that the volume is unusual but further explained his confidence. Since this is a global problem, there is high motivation to be a part of the solution. He does not expect capacity constraints to be a significant barrier to success.  

However, not everyone in the industry agrees. Andrew Boyle, co-president of Boyle Transportation, shared his experience with WSJ as well. He says that developing the expertise necessary to work with pharmaceutical companies, obtain certifications to meet global standards for the transportation of medications, and “undergoing extensive quality audits, took us about 10 years. You can’t haul chicken nuggets and then transport oncology drugs”.

It is difficult for companies in any sector to make large changes to logistics.

It is difficult for companies in any sector to make large changes to logistics. To make those changes during unprecedented events can be near impossible. With so many lives on the line, companies would be prudent to invest in third-party logistics support.  Allocating internal efforts towards the training of drivers and cargo handlers will be of the utmost priority. High-end equipment will need to be acquired and maintained. While these are hefty up-front costs, there is an opportunity for companies to make a reputation for themselves.

If you need help raising the standards in refrigerated freight, BlueGrace can help. We provide real-time tracking of our full truckload fleet providers, including any and all temperature-controlled transport partners. With industry expertise and a reliable carrier network, we can secure capacity for you and eliminate common supply chain disruptions. Contact us at 800.MY.SHIPPING or fill out the form below to request a FREE refrigerated quote today.

 

Top 3 Factors To Consider In 2021 For The Trucking Industry

With the effects of 2020 reverberating into the new year, business carries on in some unusual new ways. Most notably, COVID-19 disrupted the global supply chain and profoundly altered the flow of goods. E-commerce has shaken the retail industry’s logistics approach, as Amazon’s model dramatically altered consumer expectations in a phenomenon now known as the “Amazon Effect”. Under orders to stay home, much of the world turned to online retailers like Amazon for shopping that was previously done locally and in person. Between hard to predict consumer behavior and the erratic flow of goods, outlooks on capacity continue to vary and become more heavily influenced by urgency. 

Impacts Of COVID-19

COVID-19, which required government response worldwide, presented many barriers to the existing standards of freight. Many workers considered non-essential by governments, happened to be essential in producing, packaging and transporting goods. Borders were closed to stop the spread, further bottle-necking the flow of supply chains. The threats that COVID-19 presented to supply chain security, continuity and resilience exacerbated traditional risks faced every year and also created new vulnerabilities and risks that experts will need to tackle in the year ahead. 

“The Amazon Effect” and E-Commerce

As slowdowns became prevalent in other major carriers such as FedEx and UPS, Amazon remained comparatively unphased.  Obsessed with customer satisfaction, Amazon was well seated to thrive during what was for most others, a crisis. With COVID-19 creating changes in best-fit practices, Amazon contributed to the plight of its competitors by raising the bar.

Consumers had come to expect options like free shipping, free return shipping, same-day delivery, and high visibility. As Forbes states, “last-mile delivery is one of the most challenging problems in fulfillment,” and “The Amazon Effect” has had its heaviest influence here. Amazon has the same logistics focus as it’s competitors, inventory and freight. However, it has shifted the weight of this focus largely on controlling its freight costs. Since last-mile delivery is almost exclusively by road, shifting investment towards freight allows delivery models to expedite delivery with smaller fleets.

For freight shippers to keep pace, they will need to make logistics-minded investments that allow them to evolve with the pervasive influence of Amazon’s near-instant gratification. 

Due to the high influence of this phenomenon over last-mile delivery, the trucking industry will continue to be affected in 2021. For freight shippers to keep pace, they will need to make logistics-minded investments that allow them to evolve with the pervasive influence of Amazon’s near-instant gratification. 

Ideal Capacity for Profitability 

2020 came with many uncertainties, but there is one thing the trucking sector knows about shares: they tend to outperform as the industry emerges from capacity-related stress or economic pressure. Inventory to sales ratios are at record lows. Businesses that responded to The National Federation of Independent Business (NFIB) Optimism Index showed that increasing their inventories was a chief priority in their developing plans for 2021.    

Given the industrial exposure of LTLs, the most optimistic of analysts are preparing for a bull market.  

The end of 2020 sees all-time highs in LTL stock trading. Many analysts are projecting that the COVID-19 vaccine will increase not only consumer economies but provide a catalyst to company inventories-related-spending. Of course, the implication of this outlook is positive strides in the industrial sector. Given the industrial exposure of LTLs, the most optimistic of analysts are preparing for a bull market.  

FTL shipping has many benefits over LTL in expedition, and is favored for it’s lower spot rates. However, as factors like the Amazon Effect come into play, it is important to think critically about best-rate decisions.

FTL shipping has many benefits over LTL in expedition, and is favored for it’s lower spot rates. However, as factors like the Amazon Effect come into play, it is important to think critically about best-rate decisions. 

Trucking stands to see plenty of action in 2021. If freight companies can accurately forecast capacity-related needs, they will remain insulated from the chaos 2020 brought with it’s unprecedented factors as they continue to hit the open road into 2021.  

Strengthening Capacity Foresight

BlueGrace offers end to end support by assessing and integrating your needs into projections from our data analytics team. Partnering with an extensive list of carriers, BlueGrace can help ease the significance of the dreaded capacity crunch. If you would like more information on how BlueGrace can help you meet tightening deadlines and reduce transportation costs, contact us at 800.MY.SHIPPING or fill out the form below to speak to one of our experts today!