Riverside Logistics

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Part 1: 2024 a year of Logistics nightmares or a re-awakening?

The Pandemic has taught companies how important their supply chains are to conduct business. When they work, everything moves along as it should. When they don’t work everything breaks down, business norms are destroyed, and it leaves a big scar that lasts a long, long, time.

What will 2024 bring to the Logistics Realm? No-one has a perfectly accurate crystal ball for Logistics going forward. However, there are Macro-level influencers that should be considered when planning your Supply Chains in 2024.

For example:  Medium to Small-sized truckers have been going out of business or shutting down in record numbers in 2023. The cost of capital, insurance, fuel, equipment, and labor have all impacted margins negatively in a big way. Couple that with lower freight rates and you have a recipe for more failures. Currently, capacity is soft, meaning that there are more trucks than loads. When this happens the law of supply and demand kicks in, and rates go down. Spot rates (a “Spot” Load is a load that usually falls outside of a contract, or a one-time shipment and the rate is usually for that specific load only) have dropped significantly over the last 90 days.

Business seems to be stabilizing lately, albeit at lower levels. If this is the trough during the rest of 2023 and heading into 2024, we should expect to see rates stabilize, capacity continues to be soft and shippers becoming more in control of the logistics purchase and sale process.  That is what the current wisdom indicates.

But current wisdom could be wrong! This could be the beginning of a slide into recession. If it is, more carriers will go out of business, putting increased pressure on those left standing to shoulder the load. Shouldering the load means covering expense and making enough profit to justify their existence i.e., higher freight rates or better freight.

Another possibility is if the recession happens and lingers, carriers will be fighting for a diminished basket of freight. Rates could go down, forcing carriers to re-think how much business they want to handle. Once again, this could hurt Shipper’s ability to attract good carriers at a fair  price point.

If 2024 is when the recession impact is felt the most, then you would be wise to hold off on long-term contracts with your Logistics suppliers. The bid-ask environment will get better for Shipper’s over time if the recession does in fact materialize.

What’s on the horizon? More of the same? Or a further deterioration in rates and a further softening of capacity?

I would anticipate both. Keep an eye on the economy. Logistics is a leading indicator for the economy, so it will feel the effects early. If the economy deteriorates further, it will impact rates and service levels. Traditionally, freight rates go down, service levels (may) go up and improve with competition.

Let’s look at some key impacts on Logistics.

Transportation companies are facing more regulation not less. This makes it more difficult to succeed in the marketplace, especially for smaller sized carriers. They will either merge with or be bought out by larger rivals or simply go out of business. Once again capacity will not increase so  rates will remain soft.

Technology is providing more sophistication to the logistics environment. This allows customers to request more information  and more real-time data about their freight. Today, technology is not cheap, and is expensive  to maintain. This strains the smaller sized Logistics providers the most.

Then there is “trouble with the curve”. The yield curve inversion has many economists (and others) concerned that we have a recession coming. Haven’t seen it yet (at least in full form), but if history repeats then we have a recession coming. Once again that would mean lower rates and excess capacity until it stabilizes.

What’s headed your way?

Customers are requiring more touch points. Digitation is allowing technology to provide real-time inputs and make them available to a broad audience. An entire digital marketplace has developed to allow carriers and shippers to connect across a much broader spectrum of loads, shippers, and carriers. The Pandemic accelerated the onslaught of new ways to look at, handle, process and manage the overall Logistics space. Integration of the Eco-Systems (technology systems) is becoming a predominant trend in the logistics environment. Shippers require integration between their ERP systems and logistics provider TMS, WMS, and visibility tools. The 3PL community is having to integrate their WMS, TMS and Visibility software into a complete eco-system. This costs money, sometimes a lot of money.

There will probably be a push by shippers towards more frequent and smaller shipments. This lends itself to LTL. LTL carriers lost Yellow Freight recently and fortunately that capacity was absorbed by the remaining LTL carriers. The absorption process will soak up a good portion of the excess capacity in the remaining carrier base. This could lead to more rate stabilization and maybe even rate increases.

All in all, it’s a cloudy picture on the logistics front for the next 12 months. Keep your “eye on the ball” when it comes to managing your supply chain. If you need help assessing the logistics environment and or your role in it, please reach out to a consultant at Riverside Logistics. They can provide insight and recommendations for how to best tackle this dynamic environment.  They can be reached at 804-474-7700. Option 4. Good luck!

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Are you ready for the potential transportation related strikes in the US Transportation system?

2023 could really be a bad year for Logistics related labor!

Let’s recap at a high level. The Railroad Unions are not happy that Congress legislated to keep them from striking. UPS workers have a contract coming up and they have voted to strike…if need be. The first of 4 major unionized LTL carriers, ArcBest Freight, also voted to strike,  if need be. The dock workers on the west coast were working until recently without a contract.

All in all, it could have been a bad year for logistics if any or all of these various unions had decided to strike. UPS alone handles 6% of the US GDP, railroads handle 35% of the freight that moves, and the west coast ports handle more than half of the imports and exports coming and going from the US. So unionized labor in Logistics has a lot of clout.

What is some good advice to shippers? PLAN, PLAN, PLAN, and then PLAN some more. Be prepared to make moves to compensate for the loss of key Ports, carriers, and modes involved in your supply chain.  Make sure that you understand the possibility of extended slowdowns.

Plan your alternatives if someone like UPS goes out on strike. Can you divert to FedEx? Will FedEx have the capacity to handle the load if UPS goes on strike? Do you want to be around to find out? Figure out how you would shift to other modes and carriers to allow yourself to continue to conduct business. If you are deeply embedded in parcel shipping, then you only have DHS (primarily int’l ships), FedEx, UPS, and the Postal System (USPS) as options. If UPS goes out, then you must make sure that you can even use another option such as FedEx. If you don’t have rates and relationships with either FedEx, DHL, or USPS, now may be a good time to start to get them in place. If you wait until the UPS strike is imminent, you’ve waited too long and will be out of luck. Also consider pooling your freight into larger shipments so you can utilize LTL, FTL, or Pool distribution options. Talk to your customers and see if they are planning for any changes should the UPS worker’s strike. See if they are willing to order in larger quantities or use longer frequencies between orders to help compensate.

If you are a rail shipper, you’re not in immediate danger unless the railroad unions decide to stage a wildcat strike. Although this is a possibility, it’s not a strong one…yet. Your modal alternatives may be limited, depending on what products you ship. If trucking options are available, then you need to plan on how you would divert tonnage to truck or use intermodal to get past any work stoppages or slowdowns on the rails.

If you are an importer or exporter and rely on the west coast for a large portion of your containerized moves (bulk also) then you need to take a hard look at diverting tonnage into or through the east coast, since it won’t be affected. Although this may impact you in terms of both cost and transit time, it’s an easy tradeoff against doing nothing and getting caught with your pants down. Now is the time to set up a (more) risk tolerant logistics network that utilizes both sides of the nation to ship or receive product. There has already been a (strong) migration to the East coast because of the pandemic and the shortages it produced.

If the unionized LTL carriers such as ArcBest, go on strike, that will have an impact on the availability of LTL carrier capacity. If you are a heavy user of unionized LTL, especially ArcBest, then now is the time to look at alternative carriers, get the relationships going and rates and services in place. Remember that this is a game for minimizing risk profiles to your supply chain. You can’t do business if you can’t ship and receive products.

If any or all of the above come to fruition, commercial transportation will be impacted. In some cases, this impact will be large, in others it may not hurt you too badly. Let’s remember a couple of things. Logistics is a system with a network. When parts of the network get disrupted the rest of the network suffers too. If rail capacity is negatively impacted, it will influence truck capacity and availability. Same holds true for import-export container activity. If the west coast shuts down, then the network is thrown out of kilter and the impact (pain) telescopes through the entire system. As a result, trucks aren’t where they used to be and can’t get where they needed to go, so the chain breaks down.

I cannot stress enough how impactful the above companies, organizations and modes are to our logistics network and your ability as a shipper to conduct business. You must start your planning cycles now, before it is too late to really do anything but suffer the consequences.

One strong, viable option is to partner with a 3PL, third party logistics company, that can bring a variety of options to the table for you to use. Not only do 3PL’s have a variety of solutions, but they also usually have options that won’t break the bank.

Riverside Logistics is one of these 3PL options. We have been helping our clients navigate the nuances of the logistics market for over 25 years and we would be happy to sit down with you and map out a strategy to compensate for the potential labor issues headed your way. If you would like to speak to one of our Logistics Consultants, call us at 804-474-7700 Option 4.

Remember the mantra: PLAN, PLAN, PLAN!!

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How to make sure your Freight Broker is “SECURE”!!!

What is a Freight Broker ?

They are someone who arranges transportation for another company (Shippers) using someone else’s transportation assets (Carriers). The Broker can be thought of as a “matchmaker” between Carriers with transportation assets and Shippers with freight. Typically, Shipper’s contract with Brokers to handle the shipment of all or a portion of their freight. Some Brokers act as a backstop for Shippers. When Shippers can’t get enough capacity from their regular carriers, they utilize Brokers for the excess moves. Brokers find carriers, arrange the details of the loads, pay the carriers, and invoice the Shippers. Although there is a lot more to it than just that, you probably get the idea. Brokers are middlemen. They don’t own anything, either freight or carrier assets, they just marry the two and charge a fee for doing so.

Why do Shippers use Brokers?

There are a couple of reasons:

The Brokers usually have access to a more extensive network of carriers than the Shipper. This network is a single point of access for multiple freight options and modes. It also allows the Broker to negotiate lower rates due to the overall volume of business they provide the carriers and shippers they do business with.

Brokers have technology, like a Transportation Management System, that allows them to save a lot of time (and trouble) in finding the right carrier, at the right time, with the right equipment, at the right price, and then executing the loads efficiently.

The Brokerage can improve your Supply Chain’s performance and avoid potential execution problems by utilizing their superior relationships and expertise in dealing with carriers’ operations.

Flexibility is another key advantage. They can help you expand as needed without tying up as much capital while minimizing your risk to changing market conditions. The depth of their bench can help you improve your supply chain and cost regardless of market conditions.

If utilizing a Broker makes sense for your company, how do you make sure that you get a good one and not a bad one?

Ensure they have the necessary licenses and accreditations. Brokers are licensed by the Federal Motor Carrier Safety Administration (FMCSA) and must carry a (minimum) freight broker bond. This stifles fraud in the trucking industry and guarantees carriers get their invoices paid. Also see if the Broker is a member of TIA (Transportation Intermediaries Association), which works to improve the industry and its education and standards. TIA tests and provides certification to Brokers. See if your prospective Broker is TIA certified.

Make sure they meet your communication needs. You want Brokers to be responsive at all times. They should provide regular updates on your shipments. Any issues should be made transparent and dealt with effectively.

The contracts and costs should be easy to understand. Services must be clearly defined. All add-ons associated with the load must be disclosed upfront. This includes fees such as fuel, detention, and demurrage.

Some “red flags” to watch for with Freight Brokers

Is the broker difficult to reach or unresponsive to your calls or emails? This may indicate that they’re unreliable and don’t have the capacity to take on new work.

Is the broker vague about their charges. If so, you may get hit with hidden costs on your invoice. Make sure you understand all the costs involved with moving your goods.

Does the broker work with only a few carriers. If so, you may not get good rates. The smaller the carrier pool, the less the competition.

Is the broker financially stable? Do they have adequate insurance coverage. If not, this could be a significant risk to your load. Check their  D-U-N-S Number. Also request to see a Certificate of Insurance (COI), which provides details about their insurance policy.

Make sure that the broker doesn’t have a “conditional safety rating”.  This would mean the broker/carrier, or their truck driver, has had multiple violations and is not following regulations. Make sure the broker complies with all relevant regulations and standards and that the carriers they use have an excellent safety rating before booking your shipment.

Here are the key traits to look for in your Freight Brokerage:

  • Trustworthy
  • Flexible
  • Customer-Oriented
  • Proactive

Here are some key questions to ask a prospective Broker:

  • How long have you been in business?
  • How do you source your carriers?
  • How does your carrier on-boarding work?
  • Once you find a good carrier, how do you keep them?
  • What is the average tenure of your team members?

Hopefully, you are now better prepared to successfully hire a Freight Broker if you need one. Good Brokers can be extremely helpful in managing your Supply Chain. Riverside Logistics Services has been helping Shippers manage their Supply Chains for over 25 years. We are a member of the TIA (Transportation Intermediaries Association) and actively participate to improve the quality of the Brokerage community.

We have a very thorough carrier on-boarding process and go to great lengths to make sure that our carrier community is extensive enough to meet all the needs of our clients. We welcome any opportunity to discuss your Supply Chain and can be reached at 804-474-7700 ext. Option 4.

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Preparing a Domestic Less-Than-Truckload (LTL) bid in Today’s Market

The first question is why should you be concerned about preparing a domestic USA LTL bid?

Warehouse space is loosening up as is truck capacity. Rates usually follow a downward path when that happens. The market is 30-40% lighter right now so it is a good time for bid requests to go out. There’s a lot of truck(er)s and less business for them to handle. Conditions are ripe for bidding out your business. The freight spot market rates have come down, which indicates that overall truck market(s) are softening. During softening conditions, you are in a good position to bid out your business for annual contracts (or longer).

So how do you go about bidding domestic trucking rates?

Here are the basic steps needed:

  1. Put together your process.
  2. Indicate how many rounds you are going to do in your bids.
  3. Determine which business you are going to bid out.
  4. Decide if you are going to look at bidding all your business or just some of it.
  5. Have a goal for reducing your freight costs. For example, “x % reduction in overall LTL costs”.

Now that you have made those decisions, here are the steps you go through during the actual bid:

  1. Identify which carriers you want to participate in the bid. Get their contact information.
  2. Notify the carriers you have identified that you are preparing to send them a bid.
  3. Collect data at least 6 months (minimum) for all the shipments in play.
  4. Include lane level detail, but don’t show actual costs or carrier SCAC’s for each move.
  5. Use zip code to zip code for the origin and destination data set.
  6. Rollup the data by origin and destination states showing average weights, density, and ship sizes.
  7. Provide a data sheet for each type of product that includes specifics such as:
    1. the value of the product.
    2. the National Motor Freight Classification (NMFC) for the product (if you don’t know ask carriers for this).
    3. the average product ship weight.
    4. type and size of pallets used to ship product.
    5. packaging type(s) such as Cases, Bales, Crates, etc.
    6. Percentages of prepaid and collect freight.
    7. Bill to addresses and contacts information.
  8. Include percentages for types of business handled such as:
    1. Business to Business
    2. Business to Customer
    3. Military or Government business
    4. School/College business
    5. Other types if you have them
  9. Show how much of the business requires additional charges. These are called “assessorial”.
    1. This includes charges for things such as: Liftgate use, Inside delivery, Residential delivery, Delivery Notification or Appointments. Ask for a list from one of your carriers.
    2. Show each assessorial as a percentage of the total shipments and provide a requested target cost for each, if you know it.
    3. Show which assessorials you want the carriers to “WAIVE” the cost on .
  1. Make sure you specify what Base Tariff Rates to use. Carriers traditionally discount off of a rate basis. You need to specify which one they are to use.
    1. Present a target pricing discount level in percentage terms. Discount requests are from a common base rate set. For example, you might ask for an 80% discount from Czarlite 2010. Ask your carriers if they use Czarlite (they should, as it is common used).
    2. Designate whether or not you want the rates to be applicable to Canadian Freight, or freight going into and out of Canada. If the carrier serves or has partnerships with carriers that serve Canada.
    3. Also specify your existing assessorial breakdown percentages so the carrier understands how important these assessorials are to your overall business mix.
  1. Fuel Surcharge (FSC)scales are extremely important to the overall cost structure. Fuel can represent 30% of your total cost. Typically, FSC scales are pegged to the DOT’s weekly national average diesel fuel prices. All LTL fuel surcharges drive off the base line haul rates as a percentage. See example below:
Proposed LTL- Fuel Surcharge
National Average Fuel Price The % Fuel Surcharge Will Be
At Least But less than LTL
$1.05 $1.15 9.40%
$1.15 $1.25 9.90%
$1.25 $1.35 10.40%
  1. A Sample Bill of Lading (BOL) is helpful so the carrier can see what type of BOL you use for you business. In many cases the shipper has a pre-printed BOL that shows the classes/types of products shipped and their NMFC’s.
  2. Pictures of the product being shipped is helpful for the bid as well. Most carriers will ask for pictures of the product to accompany the bids.
  3. Lastly, an LOA, Letter of Authorization, for the carrier to provide pricing is required. This (or a copy) should be written on the companies letterhead and be signed by an officer of the company or someone who is duly authorized to negotiate freight rates.

All of the above is not mandatory for a bid, but it is all extremely important to the quality of the bid results and the ability of the carriers to correctly price your freight. It may seem a little daunting for first timers, but after you have done a couple of bids using the above process, it gets a lot easier over time.

Riverside Logistics has been doing LTL bids for over 20 years and has a proven process to get the best results from RFP’s and RFQ’s for clients. If you would like us to do an LTL, Truckload or Parcel bid for your company we would be happy to do so. One thing we have is a lot of baseline information to compare results of the bids against. This allows us, in your stead, to provide very competitive rate information and produce the best results for your company.

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What Logistics issues will have the biggest impact on you in 2023?

This year in Logistics could turn out to be a tale of two cities, “What you know” versus “What you don’t know”. There’s a lot of uncertainty about the economy and what’s happening on the world’s stage.

We do know that the Logistics Industry has had to evolve over the last couple years and 2023 will be no different as we move into an uncertain economy and the threat of recession. Your (logistics) focus should be on developing resilience, and reliability in your supply chain. COVID-19 was the test and it forced us all to adopt new business models and outlooks.

Here are some things that can impact your individual supply chain.

Merger and acquisition activity- Logistics companies grew fast and furiously during the Pandemic. This rapid growth gained a lot of attention from private equity firms looking to invest in fast-growing firms. Look for more of the same in 2023.

Expanded offerings- A key driver of change is how expectations of customers have evolved. This has caused Logistics companies to believe that their customers want a broader set of services. This can happen either by extending services portfolios (deep), or by expanding existing services across geographies, industries, or modes (wide). There will be continued emphasis by Logistics companies to go both “deep” and “wide” in 2023 to meet customer demands and needs.

Normal carrier supply cycles- During the pandemic, the cycles for transporting a load were unpredictable. You should expect a return to normal cycles in 2023.  With stable capacity brokers and shippers can become more selective in matching carriers to loads.

Technology as a key driver- Shippers turned to technology with logistics partners in 2022. 2023 requires more of the same. With a TMS (Transportation Management System), a company can handle their freight more effectively to meet customer’s demands for shorter delivery times. Technology makes it possible to automate processes like paying drivers faster, that used to be handled manually (on paper). This frees the labor pool to focus on more value-added projects. Logistics industries are more automated, and less manually intensive. The industry was traditionally an “old school sector” with lots of paper driven processes. Now, it has been pushed into the digital age by a mix of factors, including customer demand, labor shortages and the need to be able to do more with less.

Sustainability- Shippers are dealing with policy changes in 2023 and a growing interest related to environmental, social and governance (ESG) standards. Retailers have made strong ESG commitments in upcoming years. Increasing environmental regulations and consumer pressures to bring down pollution and greenhouse emissions are forcing the logistics industry to reconfigure and innovate to become “green”. It can also raise costs.

Help Wanted and Needed – Companies are continually required to come up with new ways to attract, hire and retain valuable human resources. Warehouses struggle to keep positions filled and the ongoing driver shortage has the transportation sector feeling similar pain. This will continue unabated in 2023.

Resiliency- Companies will (and should) focus more on building networks that can withstand disruption. Supply Chains face disruptive events every day, these events can add up to consequences for and within the organization. Logistics and supply chains will continue to face countless and unpredictable disruptions in 2023, including the economy, weather events, and geopolitical issues. You must try and build a network that can deal effectively with disruptions.

Reliable Logistics Partners- More companies learned the value of having reliable logistics partners during the Pandemic. These relationships can go a long way to help companies navigate the ever-changing transportation environment.

Digital data and visibility- Digitization prepared companies for mining data. This will facilitate intelligent decision-making. Data analytics provides visibility to customers. This is one of the biggest challenges for shippers today. It’s difficult to know what’s going on in the chain. By digitizing supply chain process and collecting the data through the life of a load, shippers have (full) visibility on their shipment. In 2023, digitization, data, and visibility will become more prevalent, and increasingly faster and accurate.

Reshoring/nearshoring- Reshoring/Nearshoring emphasis has increased over the past couple of years. Driven by tension between the US and China, spikes in shipping costs, the pandemic’s effects on global supply chains, and concerns about sustainability companies have relocated from Asia to Mexico/US to lower transit times and reduce risk. Proximity allows goods to be transported (more often) over the road at competitive prices. This emphasis will continue driven by more “Black Swan” events.

Diesel prices- The price of US diesel fuel rose significantly (roughly 55%) in the first half of 2022. The Russia-Ukraine conflict was a chief cause. In addition, International rule IMO 2020, with Sulphur content restrictions, will take further effect and businesses moving cargo will have to find ways to adapt to this rule as it raises prices for fuel.

Capacity- 2023 probably won’t bring an increase in the supply of transportation capacity. As insurance, fuel and maintenance costs continue to rise, and demand falters, supply may shrink as smaller carriers struggle, forcing them to either merge or quit operations.

Accelerating inflation- Interest rate hikes, enacted to slow consumer spending and inflation, have started to depress the U.S. economy. Transport companies must navigate this moderation in demand. Going forward, the struggles will continue as we enter a possible recession in 2023.

Ongoing Semi-Truck Shortage  

A change in the composition of the national labor market was felt all over the world. This pressure puts semi-truck manufacturers behind the curve. The U.S. transportation industry requires roughly 200,000 new vehicles a year to maintain an adequate age of its fleet. During the height of the Pandemic, truck manufacturers missed these replacement levels, forcing trucking companies to use older vehicles. This year, manufacturers are on track to meet the transportation industry’s replacement demands. However, the current backlog of semi-truck orders is the largest ever. Carriers typically expand their fleet sizes when spot rates are high. They couldn’t do that this year.

Consumer Spending- The way people spend their money drives the transportation world. Consumer spending patterns are starting to shift. When the pandemic hit, consumer purchases of durable goods spiked. E-Commerce transactions set all-time highs. This shift required a massive response from trucking companies and their drivers. Recently, with rising inflation and no pandemic restrictions, consumer buying habits have shifted again. Now consumers are spending less money on durable products which require trucking and more on services/experiences which don’t.

Spot rates– Freight demand has outpaced the supply of trucks. This trend will probably continue into 2023 as consumers paying with credit at an accelerated rate feel the effects of inflation. It’s likely that consumer spending will slow across the board in 2023, decreasing the transportation industry’s workload and keeping spot prices low.

Managing Logistics in 2023

Based on the above topics there will be plenty of challenges to overcome in 2023. It won’t be easy, but it might present a good opportunity to make improvements and calibrate your supply chain for the future. To navigate 2023 successfully try to keep the following in mind:

  1. Keep your transportation providers fully informed
  2. Prioritize flexibility when planning your shipments
  3. Work with a diverse group of freight carriers and 3PL’s

A good supply chain partner like Riverside Logistics can really help you meet the challenges in 2023. Pleased call us at 804-474-7700 Option #4 and ask for Jim Durfee, VP Business Transformation. We’re happy to look into your network and guide you through the potential 2023 logistics turmoil.

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