Transportation Professionals Don’t Want 2021 to End Like 2020

In the first half of 2020, transportation market rates were less than long-term contracted rates and shippers were enjoying low-cost shipping rates using transactional brokerage and market rates. But then beginning in July 2020, market rates turned and became higher than contract rates. Also, during Q3 and Q4 2020 the load-to-truck ratio increased substantially from 3 loads for every truck to 5.5 loads for every truck, causing shippers big problems with capacity. This left many shippers scrambling with budget issues, capacity issues and poor service to their customers. 

During the first quarter of 2021, we’ve seen market rates reduce from the highs in Q4 2020. However, today’s rates are substantially higher than the first quarter of 2020. In February 2020, van spot rates were $1.79, but one year later in February 2021, van spot rates rose to $2.40, an over 30% increase year over year. Also, comparing the load-to-truck ratio for February 2020 to February 2021, we see a jump from 2.0 to 7.5, a 375% increase year over year. 

I believe starting in the third quarter of 2021, market rates and contracted rates will significantly increase. This is to be expected, but with the load-to-truck ratio at 7.5, I believe 2021 rates will rise faster and higher than in 2020. Therefore, danger lies ahead for shippers who do not prepare for what is coming. So, what can shippers do? 

I recommend the following: 

• Take advantage of the current market to leverage the procurement of 12-month rates and capacity with asset-based carriers. 
• Evaluate your ratio of brokerage vs. asset-based lanes and lock 12-month rates to decrease the usage of brokers.
• Evaluate your execution model to take advantage of lower rates and improved service:

a) Do you have the ability to create round trips?

b) Do you have the ability to execute continuous moves?

c) Do you have visibility to your freight?

d) Do you have the ability to react to customer changes and demand?

• If uncertain, write me – I’m happy to help.

 If you’re in charge of your company’s transportation budget and performance, don’t let the end of 2021 be like the end of 2020. You really don’t want to spend time around the holidays meeting with the CFO and CEO like you did last year.