How to Navigate Unpredictable Transportation Costs in 2023
It should come as no surprise: our outlook for 2023 is that of continued uncertainty. How confident are you that your carriers can handle everything thrown your way next year? Anyone expecting no disruptions in 2023 might be destined for a career outside of transportation.
How do you mitigate transportation risks in a year in which no one can trust their budget to be accurate?
Working with a logistics partner can give you a competitive edge in ordinary times; in the current market, it’s more like transportation insurance. But how do you find the right partner? And what are the right criteria for comparing one provider to another?
We recommend focusing on three metrics: tender rejections and paper rates, one-time shipments, and shipping lead times.
Tender Rejection Red Flags
When markets get turbulent, trucking carriers start rejecting more tenders so companies that have contracted freight with them must turn to the spot market and pay 20%+ more on rejected shipments.
We recommend having at least 95% target rate for accepted tenders for your contracted freight. Should carriers start rejecting 5-10% of your loads, that’s a yellow flag and could be the start of worse things to come. Rejecting over 10% of your contracted loads should never be acceptable as the carrier is barely doing the minimum at this point – why have a contract at all if this much of your freight is being rejected?
To make matters worse, any rejected tender is unlikely to arrive on time.
Some carriers only offer “paper rates,” which are artificially low rates that allow them to win contracted lanes but then they don’t pick up. Those who negotiate these deals may look like heroes initially but not so much when the paper rates go unrealized and much higher rates kick in. There goes your budget.
Often, the carrier who gets paper rates is not held accountable for what happens afterward even though everyone is affected: the transportation group has to pay more for freight, the operations group incurs more overtime, the buyer group loses leverage on future retail contracts, sales must explain why loads are late, and executive management is left to make excuses for poor results.
Instead of focusing on the cheapest price, avoid outcomes like this by keeping the big picture in mind.
LiVe Logistics is a broker and works with many carriers throughout North America. Most shippers send out RFPs 1-4 times per year – we send them out daily. This helps us ensure that 95% or more of freight contracted with us gets accepted and arrives on time, which brings us to our next metric…
On-Time Delivery & Communication
Because things happen – accidents, weather, illness, mistakes – 95% is also a good target for on-time deliveries. Anything higher than that could cause major retailer fines and lost shelf-space.
We believe on-time delivery should be reported to you monthly, or at least quarterly, with an explanation for every late delivery.
Do you get on-time delivery and tender rejection rates from your carrier regularly, with explanations for poor quality service?
Since LiVe Logistics is a broker and can work with any carrier, if a carrier can’t pick up or deliver on time, they can’t work with us. They know we have hundreds of loads per day for F500 and other companies and we hold carriers accountable. When something else is causing late shipments, we communicate that with clients so it can be corrected – it’s often because of one or two facilities with personnel problems that our clients can address.
What’s your tolerance for late loads? If it’s high, then give us an open window and we’ll drive down your costs by getting you the lowest rates.
Shipping Lead Time
You get the best freight rates when you schedule your loads 48 hours out. If you schedule your load one day out, rates can increase by 10-15% and same day rates can be 20-50% higher. Scheduling loads earlier in the day gives more time to find an alternate carrier/driver if the first one can’t make it on time – charges on afternoon shipments can be much higher, especially if needed the same or next day.
Partner with LiVe Logistics
Anyone can find extra trucking capacity and manage problems if they have enough time, but what if that takes another 10-12 hours per load? Do you have extra staff to do that?
In uncertain times, it’s important to mitigate risk by finding additional capacity. LiVe Logistics can do that as well as find alternative options at competitive rates.