09 Apr COVID-19 Market Update
Over the last few months, Concept has been keeping an eye on the Coronavirus spread. Four weeks ago we started gathering data and information on how the virus could impact our industry, our customers and our people. Concept plans to keep this information in front of our clients and partners so that we can help them prepare and implement not just contingency planning, but also growth plans for those that are still growing.
US Domestic Freight:
Let’s begin with Outbound Tender Volumes, as this impacts our client’s pricing significantly when the market is flooded with freight and demand increases for trucks. The spread of Covid-19 accelerated in early March turning the curve of outbound tenders into a “hockey stick” and the curve continued through the last week of March. This spike was nearly a 25% (23.17%) increase of volume in the marketplace. Many shippers saw rate increases of 20%-40% on some higher-volume lanes where the demand significantly out-paced available capacity.
Many of Concept’s customers were fortunate that our long history with solid carriers resulted in minimal rate increases. In fact, we avoided rate increases in most lanes and regular freight because this spike was short-lived.
The increase in volumes was on top of the eroding volumes of textiles, clothing, and other non-essential products that are closing retail locations, which is still playing out in the outbound tender volumes. This means that we probably saw a surge of new volume hitting the market closer to 30%-40% if we factor in the decreasing volumes of hard-hit markets. A close Logistics friend of Concept’s has seen over 48% of their volume disappear because they were very active in warehousing and fulfillment of clothing and other textiles that people aren’t buying right now.
The increased demand for trucks through March resulted in elevated tender rejections with many carriers being called in for relief efforts. This market volatility looks to have leveled out towards recent norms, but with volumes plummeting many carriers are going to have to look to new lanes and find new supply chains to service if the volumes keep crashing.
With nearly 40% of US companies closed to flatten the curve, it isn’t likely that standard supply chains are going to return to normal any time soon. It will take time to restore some of the supply chains that were more heavily impacted.
One point of caution for any Shippers reading this, if volumes continue to drop in the coming weeks and months you will start to see lower pricing options presented to you. Don’t take the bait, especially if you are a medium to high-volume shipper. Carriers that will be offering their services at lower rates will do so because the business they were hauling before went away and what do you think those carriers will do when that other freight comes back? If you have regular carriers on your freight and you move the freight to a lower-cost carrier during this market, that dependable carrier that has been there for years will likely find another Shipper to become reliable for.
That is not to say this isn’t a time to fine tune and sharpen your Transportation strategy and look for some cost savings. The rate decrease might not be as fast or as deep with some of your longstanding carrier relationships compared to what you will be offered, but your 3PL partner should be looking for proactive strategies to continue to deliver the best service at a competitive cost.
Concept utilizes resources like FreightWaves, Truckstop.com, DAT and other market information to constantly monitor the lanes and markets our customers ship so we can be proactive with our carrier pricing. Now is the time to be strategic with your Logistics solutions. Our Discovery Calls and Shipper Consultations tend to highlight more “soft-cost” savings than “hard-cost” savings. When we say “soft-cost” savings we are referring to the added efficiencies and time we give back to our clients by streamlining the order entry process and coordination that many of our clients rely on Concept for. Can you benefit from an out-sourced transportation department to take some of the heavy-lifting off your plate and free your people up to contribute to your cause elsewhere?
As Concept has recently revamped our website and launched our social, we will continue to bring this type of information to our customers and followers, all part of Concept becoming Next Level! We look forward to future market updates and a deeper dive into some of the specific markets our clients ship in.