Staggering rate increases are blowing up budgets everywhere
At BluJay we manage billions in freight and have a network of over 40,000 carriers and partners. I don’t say that to brag (trust me, I’m a Bears fan) – I say it because we have a view of the market that very few people have. We can see things others cannot. And what we are seeing is unprecedented in its scale. To be sure, people have been talking about the capacity crunch for a while. Is it coming? Is it a myth? How bad will it be? Well, it’s here. It’s not a myth. And if you’re not prepared, it’s pretty rough right now. Here are some numbers from this month:
- Load board premiums are running 30-50% above contract rates, in certain head-haul markets.
- 2018 contract rates are up 6.5-11% year over year.
- 99%+ total capacity utilization in the market today.
- Driver shortages are crippling utilization at the worst time. One carrier with 800 trucks is short 200 drivers.
The recent hurricanes have taken a tight market and applied a vise grip to it. FEMA is taking 6-10% of the market with relief shipments. Their lucrative layover system is creating an environment where it is taking weeks for these drivers to get unloaded. With the holiday season in full swing, prices are up, capacity is high and customer demands are soaring. There will be winners and losers this holiday season for sure. The good news? The Cubs finished in first and are set to defend their title. But I digress…
What can you do?
If you’re unprepared, at this point there won’t be anything you can do except pay the higher rates and execute where you can across your distribution network. There is no magic bullet. Get creative and survive this season.
The capacity problem isn’t going away anytime soon. Supply chains may get some relief when the storm impact recedes, but it will still be an issue that continues to grow. The best thing you can do now is plan and prepare. Over the course of the next few months, I will be sharing tactical and concrete steps you can take to help you navigate the Capacity Crunch.
First things first, if you’re still operating on a static, on-premise transportation solution, you’re using the equivalent of a typewriter. Everything is more difficult on those systems. Connecting with partners, finding new carriers, optimizing routes, upgrading, and ongoing maintenance is all more difficult. But for the purposes of this conversation, let’s focus on finding capacity if you’re stuck on an old platform.
On-premise solutions are like riding a chuckwagon in deep ruts. They’re old, slow, and stiff. You set carriers up for static routes and legs. When you need to find new carriers or new lanes, you need to go through a long and manual process of finding and setting them up. These systems truly limit your ability to react to changing conditions. What if there were thousands of carriers already connected, just ready and waiting for you? Users of our Global Trade Network have access to thousands of carriers in a matter of minutes. As a matter of routine our customers add new carriers to support new lanes, find better rates, and serve their customers more effectively every single day.
So, my first piece of advice is join a network. It will become the base from which your flexibility and operational creativity will be born. You will not be hamstrung by static old systems and processes. You will be able to find and access new capacity faster than ever.
Next up: I will share our ongoing work with our carrier partners and Logistics-as-a-Service customers to find excess capacity and cost savings.
Feel free to contact me if you have any questions. I’m happy to help. But don’t contact me when the Cubs are on…the Bears, yes, but not the Cubs.
Tim Hinson is Chief Operating Officer at BluJay Solutions, overseeing implementation, strategic support, and procurement services, along with Logistics as a Service (LaaS).