Do You Have the Transportation Capacity for a Strong 2022?
Recent COVID-19 vaccine and testing regulations, particularly for cross-border drivers, may impact the cost of freight. Here’s how to ensure your capacity remains steady throughout Q4 and 2022.
Regulations of the COVID-19 vaccination status of drivers varies greatly depending on region. Over the past month, US and Canadian regulations have vacillated, and will likely impact the cost and availability of transportation throughout the end of Q4 and into Q1 of 2022.
The recent FreightWaves report noted that, “The Biden administration’s vaccine mandate, proposed in September, will likely have far reaching consequences across the industry. A federal vaccine mandate could cause a mass exodus of drivers, exacerbating an already serious situation.”
While these regulations are not set in stone, the implications on the economic outlook of freight transportation could point to a significant increase in cost – up to $10 more per mile.
COVID-19 Vaccination Regulations Expected to Impact the Cost of Freight
Unless the mandates are rolled back or officially adjusted, businesses with over 100 employees may be required to have all employees vaccinated by January 4, 2022 or have their employees submit weekly negative tests. However, Labor Secretary Marty Walsh announced earlier this month that most truck drivers will be exempt from this requirement.
“Most truckers are not covered by this, because they’re driving a truck, they’re in a cab, they’re by themselves, they wouldn’t be covered by this,” Walsh said.
While most drivers are exempt, the vaccination and testing requirements could still apply to truck drivers working in teams in the same cab, as well as those who interact with people in buildings at their destination or starting points. This could still impact OTR drivers unless they drop and hook and have no interaction with on-site security check-in.
Additionally, the US will require all cross-border drivers to be fully vaccinated. For organizations shipping goods internationally, this would likely increase the cost and competition for transportation Canada and Mexico.
Economic Outlook for Q4
According to the latest FreightWaves report, tender rejections are expected to face a standard decline in December as we near the holidays.
“Expect a trajectory in the National Tender Reject Index that resembles 2020.
“The lucrative spot market will continue to pull carriers away from their contractual commitments, hampering compliance levels for shippers and keeping tender rejection percentages above 20%.” Carriers have had a good year and may be able to reward drivers with more home time as the year ends. As drivers stay closer to home over the holidays and shippers become more creative, the average length of haul could decrease, leading to a reduction in the number of spot market loads.
“Appreciating spot rates will precede contract rate negotiations ahead of 2022, playing heavily into the negotiating favor of carriers. We expect to see an increased prevalence of mini-bids [and shorter bid timeframes], as shippers will look to support routing guide compliance for Q4, without committing to rates for the duration of 2022.
“Supply constraints have no quick remedies and should remain an issue well into 2022. We believe the trucking industry will finish 2021 with another strong quarter.
“Shippers are pushing their efforts as far forward as they can, which means expect earlier-than-typical shipment cycles with the possibility for relief not occurring until Christmas itself forces everyone to take time off.”
Additionally, we have observed that wood prices are projected to rise near or above 2021 levels going into the 2022 construction season, so this could indicate that many anticipate a strong 2022 construction season. High paying, stay home construction jobs often compete with driving jobs for workers and could further impact driver supply.
Plan Ahead to Avoid Capacity Issues
Start planning now to avoid potential capacity issues due to an overtaxed supply chain and a shortage of drivers and equipment. Companies should identify capacity backups in the case of severe driver shortages in Q1 of 2022.
Working with an experienced broker LiVe Logistics can help mitigate the risk of low capacity by planning ahead to secure transportation, strategize transportation, and problem solve any logistics obstacles that arise.
LiVe Logistics has decades of experience in strategizing and managing freight to drive down the total cost of ownership (TCO) while providing secure, timely transportation to clients across industries. Contact us to get ahead of the game for the end of Q4 and the start of the new year.