ship a container from Asia to the U.S. West Coast in September 2021 exceeded $20,000. One year later, the price hovered around $5,000. Logistics costs don’t always correlate with consumer prices. A cooling economy and reduced bottlenecks, however, could serve to push both down in the coming year. That doesn’t mean it’s time to start squeezing pennies out of carrier contracts. “The shippers that do the best are those who are perceived as being reasonable by their carriers,” says Avery Vise, vice president of trucking at FTR Transportation Intelligence. “Rather than waiting for the market to turn south, or trying to make up for what they went through in 2021, they can get much more stability by creating trust with their carrier base.” With the right combination of strategy and relationship management, business logistics executives can let some air out of the tires of in ated transportation costs. n
As online shopping surged in popularity, expensive parcel deliveries gained momentum.
Transportation rates headed back toward normal territory at the end of 2022 as well. Average truckload spot rates, which began the year at $3.16 per week, approached $2.50 by August, according to DAT. The Cass Inferred Freight Rate, which measures expenditures divided by shipments, slowed nearly every month in 2022. The declines aren’t exclusive to trucking, either. The average cost to
loaded at a shipping facility, nds the American Transportation Research Institute. Those delays cost truckers nearly $1 billion in wages annually, and increase the risk of accidents on the road, according to the Department of Transportation. Shippers should be mindful of how changes in lane density and utilization affect their core carriers, especially if they lead to longer wait times and fewer trip miles for their drivers. “It can put long- standing carrier relationships and vital capacity at risk,” Pumilia cautions. Conversely, nurturing robust communication can be bene cial to all parties. Instead of indiscriminately soliciting trucking capacity, Ryan Polakoff, president of Nexterus, a supply chain engineering company based in New Freedom, Pennsylvania, advises shippers to ascertain their carrier’s imbalance level and nd out what type of freight they need. “Companies have to learn how in ation impacts their network,” he says. “Having a transparent conversation helps everybody work on a mutually bene cial strategy to overcome rising prices.” INFLECTION POINT In ation may have hit an in ection point in the second half of 2022. After peaking at nearly 9% in June, price growth eased in the second half of the year. By November, the consumer price index slowed to 7.1% annual growth, nds the Bureau of Labor Statistics.
MONEY IN THE BANK When costs rise, it benefits companies to amass as much working capital as possible. There’s no shortage of ways to use it in an inflationary environment. But carrier payment terms might not come to mind as the first source of additional assets. After all, carriers need those funds to keep their own operation running. As of January 2022, trucking firms netted a profit margin of only 1.85%, shows data from the NYU Stern School of Business. U.S. Bank’s trade finance solution allows shippers to extend their payment terms while paying carriers within the original deadline, explains Je Pape, senior vice president and director of product and marketing for transportation at U.S. Bank. The system audits carrier rates against a shipper’s payment terms. If the terms match, the carrier is paid immediately. On-time payments can help you become a shipper of choice. “There’s no question of ‘The number of widgets you billed me for isn’t what I received,’ or ‘I overpaid by 10% so I’m going to deduct it from the next invoice.’ All of those discrepancies are resolved within the platform,” Pape explains.
206 Inbound Logistics • January 2023
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