Monthly Archives: August 2016

6 Transportation News Stories: August 2016

 

  • Drone.jpgLouisiana Weather Causes Shipment Delays. Louisiana called a state of emergency after heavy rainfall affected the region. More than 280 state roads have been flooded and closed, affecting intermodal rail and truckload shipping. “It’s a major disaster,” said Rodney Mallett of Louisiana Department of Transportation and Development. (Learn more here.)
  • Market Condition: Continued Price Declines. The most recent edition of the Truckload and Intermodal Cost Index reflects the ongoing stretch of rate declines for both modes. Truckload rates dropped 1.6% annually in July, marking the 5th straight month of annual declines. July’s intermodal rates were down 2.4% annually. (Read more here.)
  • GHG and Fuel Efficiency Rules Set. The EPA and DOT’s NHTSA finalized standards for medium- and heavy-duty vehicles that will improve fuel efficiency and cut carbon pollution. The final rules build on the fuel efficiency and greenhouse gas emissions standards already in place. (How Will Shippers Be Affected by Green Regulations?)

  • FAA Permits Test Delivery Drones in US. Alphabet, Google’s parent company, will be flying drones in designated areas to gather data to develop an airspace management system. Google is pressing for product delivery-by-drone within the next 3 years. (When Will Your Products Be Delivered by Drones?)

  • 100 Great Supply Chain Partners Announced. SupplyChainBrain identifies emerging trends, technologies and best practices, forward thinking ideas and cutting-edge solutions, and every year, the publication identifies 100 great supply chain partners. Click here to see this year’s list!
  • Jumbo Cargo Ships Pass through Panama Canal. The Panama Canal Authority announced that 40 container vessels have transited the waterway since the expansion project opened. The pace is expected to double during the third quarter and keep rising. (Read more about the Panama Canal’s expansion & it’s impact on US transportation here.)

 

Check out the trending supply chain news from July 2016 and June 2016.

How New GHG Regulations Affect the Future of Transportation

On August 16th, the Obama administration released the final rule on Phase 2 of greenhouse gas (GHG) regulations for the transportation industry. Phase 2 is more comprehensive than Phase 1, and will gradually be enforced from January 1st, 2018 until its full implementation in 2027.

Under the Phase 2 regulation, for the first time ever, trailers will be subject to aerodynamic standards to improve fuel efficiency beginning in 2018. Additional truck and trailer requirements, including fuel-efficiency guidelines and CO2 emissions standards, will be implemented in 2021, 2024 and 2027. Phase 2 GHG emission regulations will affect every business involved in freight transportation.

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have worked closely with industry insiders to develop the final GHG rule, so many in the transportation industry are satisfied with the rule.

How Phase 2 Will Affect Carriers

A spokesperson from Daimler Trucks North America said, “DTNA is pleased that the EPA and NHTSA chose a non-disruptive implementation of the standard, thereby allowing the industry over a decade to phase in technical changes.”

However, as with all new regulations, for every potential benefit there is a potential danger. Glen Kedzie, who provides energy and environmental counsel to the American Trucking Association (ATA), said, “While the potential for real cost savings and environmental benefits under this rule are there, fleets will ultimately determine the success or failure of this rule based on their comfort level purchasing these new technologies.”

Kedzie also mentioned that lab tests and cost estimates are not a substitute for actual highway experience. The effects of Phase 2 regulations are difficult to predict and we won’t know for sure until after they’ve been implemented.

Potential Benefits of Phase 2 GHG Regulations

  • It’s expected to cut 1.1 billion tons of CO2 emissions over the lifetime of the rule
  • 2 billion barrels of oil will be saved
  • It’s a huge step in achieving climate change goals agreed upon in the2015 COP 21 conference
  • Original equipment manufacturers (OEMs) gain long-term certainty –continuous demand for green technology
  • 2027 heavy-duty trucks, compared to 2017 models, will save $170 billion in fuel costs over the lifetime of the vehicle

Potential Dangers of Phase 2 GHG Regulations

  • Rising operating costs due to investment in new equipment, which will increase the cost of shipping
    • Small carriers are particularly vulnerable to monetary investments and if new trucks and trailers with fewer emissions are too expensive, many could go bankrupt or exit the industry
  • OEMs may be unprepared or ill-equipped to meet aerodynamic standards as soon as 2018
  • More fuel-efficient trucks mean less fuel is bought, which means that the Highway Trust Fund (HTF) loses a portion of its main source of revenue – leaving already unstable infrastructure in an even more dire condition, increasing the risk of accidents and disruptions

How Phase 2 Affects Freight Shippers

Phase 2 GHG regulations have great potential benefits for shippers. Without making any of the upfront investment in equipment or processes, they may experience lower shipping costs. Carriers may pass on cost savings due to lower fuel costs and increased efficiency in operations.

As with carriers, there’s also great potential dangers to shippers if critics of the regulations, such as the Highways and Transit Subcommittee Chairman Sam Graves (R-MO), are correct about the undue burden it will put on carriers. In this scenario, shippers could face higher transportation costs and a need to redesign their distribution network. Carriers would not be able to pass on any type of cost savings, creating a fragile pricing environment.

To avoid being hurt by Phase 2 rules, shippers should keep an eye on 4 trends in the industry that could indicate rising costs as a result of GHG regulations.

  1. Fuel Taxes and Surcharges

Even if fuel costs decrease, carriers won’t necessarily pass savings on. Freight carriers could maintain current fuel surcharge levels, or even increase them to help cover the cost of equipment investment and recover from a long stretch of small profits.

With the HTF set to lose funds from fuel-efficient vehicles, the government might raise the tax on gas and diesel, which hasn’t been done since 1993. An increase in fuel taxes will lead to higher freight rates, as the tax will cut into carriers’ profits.

  1. Carbon Taxes

Carbon taxes are quickly gaining popularity around the world. They are even being implemented in some places around the U.S. An energy-dependent, emission-heavy industry like freight transportation will inevitably be hit by these taxes. It could be a way to fund the soon to be depleted HTF, or it could simply be implemented to reach COP 21 goals. Either way, carbon taxes will increase operating costs for carriers, which will translate into higher rates for shippers.

  1. Mode Usage

Freight volumes shift to rail transport when cost is a bigger priority than service – or, in other words, when over-the-road transportation costs become unsustainable on a large scale. If freight volume starts shifting to rail, it’s a sign that carriers are raising rates due to fuel costs, taxes or equipment investments. A shift in mode usage is a signal for shippers to find cheaper and fuel-efficient transportation.

  1. Truck Capacity

When times are tough, small freight carriers are pressured into unsustainable rates and are susceptible to bankruptcy. When carriers are experiencing low profits, it’s more difficult to pay truck drivers a high salary. Without competitive salary, drivers find jobs in other industries that pay well and are close to home. A loss in drivers creates a loss of truck capacity and hints at rising operating costs for carriers, which translates into higher freight rates for shippers.

Conclusion

Phase 2 GHG regulations will have a far-reaching impact for the transportation industry. Despite potential dangers posed to shippers and carriers, much of the industry is confident these rules are reasonably achievable and will bring about cost savings and environmental benefits.

Request Free Logistics Opportunity Assessment

 

 

To cut transportation costs now or to prepare for rising freight rates, check out these s:

 

Sources: Transport Topics, Print, August 22, 2016 Issue

How Important is Accuracy on the BOL?

A bill of lading (BOL) acts as evidence: a receipt and a document of freight services. It’s proof of a contract between a carrier and shipper. It’s a Analysis.jpglegally binding document, containing relevant information about the shipment. A BOL includes pickup and delivery addresses, a place to note any freight damage, shipping/purchase order numbers, special shipping instructions and other details so the freight is delivered and invoiced properly.

2 Most Common BOLs

  • Straight: Non-negotiable. Where goods have been paid for and the shipment will be delivered to a consignee upon confirmation of ID.
  • Order: Where the goods and BOL can be transferred by endorsement to third parties.

“The BOL is a standardized short form or long form, but how you fill it out is not very standardized – as long as the carrier has the basic information, he can work with it.” says Elie Hiller of Transwide.

It’s important that the BOL is signed and dated accurately to record the actual date on which the cargo was loaded. If the BOL is post-dated there are serious consequences: the company is exposed to claims from cargo interests and the P&I cover might not be available. The BOL is a legal contract and can be used in litigation. If the bill of lading is inaccurate, there are definite consequences.

Freight claims occur when BOL information does not match the actual service provided or product received. If the BOL indicates that the goods were loaded in good condition, but the consignee receives them damaged, the consignee will be entitled to make a claim for the damage against the carrier. Or, if the BOL states there are 100 boxes, but only 75 arrive, the consignee can make a claim for the shortage.

Types of Freight Claims

  • Limit Liability. The company may lose its right to limit liability for a claim for freight damage or shortage.
  • Lose P&I Cover. P&I cover may not be available for claims in situations where the description of goods isn’t correct.
  • No Indemnity from Charterer. No obligation to sign a bill of lading that wrongly describes the cargo.

Before signing off on the BOL, the receiver should inspect the cargo to ensure that the product is not compromised. Double check the BOL is accurate compared to the delivery of goods, and verify the accuracy of the cargo description before signing. Any damage or defect should be recorded in detail.

Tips on Generating an Accurate BOL

  • Information should be clearly written or typed in the space provided.
  • Use the same BOL form so you are familiar with the information that needs to be provided.
  • Refer to a TMS to decrease chance of error.
  • Eliminate risks by saving data online and prepopulating the fields.
  • Double check information before submitting the BOL.

Recommended s:

5 Tips for Small Businesses to Ship On-Time, Every-Time

Delivering products on-time is crucial in any industry. With businesses and consumers alike, this final touchpoint in the supply chain represents Outsourcing-1.jpgyour ability to fulfill their needs competently. It is especially important for small businesses to deliver products on-time, as a poor reputation can be detrimental to the bottom-line.

Whether you are shipping to consumers or businesses, delayed shipments should be taken seriously. Late deliveries slow down the entire supply chain and hurt customer relationships, which can have serious consequences for your bottom line: 70% of consumers may not shop with a retailer again after receiving a late shipment, and 86% of consumers say their expectation for on-time delivery increases in peak seasons like the holiday shopping season.

A transportation management system (TMS) is a great tool for small businesses to improve shipping performance. TMS software helps you find the lowest linehaul rates on the market, choosing from a network of carriers pre-qualified for safety and service. Freight billing and audit is automated, and all data is collected in one system, enabling freight reports for visibility into your transportation processes.

A TMS provides the foundation for freight optimization. It gives you the visibility to discover flaws in your distribution network. If you couldn’t see what’s wrong with your transportation, how would you fix it?

To ship on-time, every-time, follow these 5 tips:

  1. Analyze Performance Data for Supply Chain Partners

Are some of your inbound materials consistently delivered late or damaged? Are you delivering late to one of your customers more often than the others? Sometimes, suppliers, customers and freight carriers cause late deliveries. With the visibility you gain from a TMS, you can pinpoint which partners in your supply chain are causing trouble and work with them to fix it.

  1. Assess Dwell Time at Your Facility

The way you ship items may be slowing down the transportation process and causing late deliveries. Dwell time, or how long a driver has to wait at your facility or location, is very important. If dwell time is too long, it may force the driver, due to hours of service rules, to take an extra day to arrive at the destination. A long dwell time will decrease a driver’s willingness to haul your freight, leaving you to work with carriers that have a bad history of truck and driver out of service rates.

  1. Create Visibility into Freight Movement

Although LTL shipping is convenient and fast, you are particularly susceptible to delays. LTL trailers are filled with multiple loads from different companies, so the route is longer, and more freight handling is required, which leads to a higher chance for  damage.,  When you ship LTL, avoid delays and damage by ensuring there is a track and trace feature available, so you can keep an eye on your freight.

  1. Lean on 3PL Expertise

3PLs have proprietary technology and a large carrier capacity to put to work for you. This enables visibility into transportation and some of the lowest linehaul rates on the market. These carriers are pre-qualified for safety and security, so you’ll experience less frequent disruptions. A 3PLs expertise will help you increase shipment speed, reliability and reduce costs. A 3PL will take care of transporting your goods while you focus on core competencies.

Additional tip: always inform customers of a late delivery. While warning customers of an anticipated disruption won’t stop the shipment being delayed, it can mitigate the negative impact on reputation and perceived service. Having track and trace features from a TMS will enable you to warn customers of a late delivery. When your customers are made aware of a delay in shipping, they can make plans to notify their customers and/or prepare to receive the shipment at a different date, reducing the inefficiencies on their end.

There are many practical TMS solutions for small businesses – especially TMS software hosted on the cloud, where you only pay for what you use. Typically, the cost savings from lower linehaul rates and better routing offsets the cost of using a TMS. TMS software allows small businesses to spend less time on transportation and more time on core competencies.

Learn More about PLS PRO Here

 

 

Keep reading:

PLS Logistics Services Named as One of Pittsburgh’s Fastest Growing Companies

PLS Ranks on Top 100 List for 2nd Consecutive Year

CRANBERRY TOWNSHIP, PA – August 23, 2016

PLS Logistics Services (“PLS”), a leading provider of technology-enabled transportation management and freight brokerage services, has been named as one of the fastest-growing companies in the Pittsburgh region by the Pittsburgh Business Times.

The list is created annually, and determined by a company’s growth rate over a three-year period. On August 18, the Pittsburgh Business Times revealed 100 of Western Pennsylvania’s fastest-growing companies at an awards ceremony. This year, PLS ranks 67th on the list.

“We’re honored to be recognized with other successful companies in the region,” said Greg Burns, President and CEO of PLS. “This is the second consecutive year PLS has been named to the fastest-growing companies list, and this would not be possible without the strong support of our shipper and carrier partners, along with the hard work and dedication of our team members,” he said.

PLS was also named to the Inc. 5000 list as one of the nation’s fastest growing companies. PLS has 12 office locations and more than 700 employees nationwide.

About PLS Logistics Services

PLS Logistics Services is a leading provider of technology-enabled transportation management, freight brokerage and outsourced transportation solutions for shippers across all industries. PLS handles millions of loads annually across all major freight modes: flatbed, van, LTL, rail, barge, air and ocean. The PLS carrier network consists of over 45,000 trucking companies, Class-1 railroads and major barge companies. To learn more, visit www.plslogistics.com or call (888) 814-8486.

Media Contact
Caitlin Kelly
Content Marketing Manager
(724) 814-5194
publicrelations@plslogistics.com

Supply Chain Automation: The Only Answer to E-Commerce Challenges

The number of online shoppers is estimated to reach 270 million by 2020. In 2015, online sales totaled $335 billion, and a recent report from Forrester predicts that online sales will grow by an average annual rate of 9.32% over the next 5 years.

Demanding e-commerce shoppers are challenging the way businesses approach fulfillment. Among many different solutions employed across a number of industries, automation in the supply chain has been the most successful.

Automation in the Warehouse

Automation in the supply chain helps increase speed, accuracy and productivity. Today’s warehouses are no exception – they are hi-tech and extremely efficient, using automation to rapidly fulfill orders.

“To be great in e-commerce, you need to be sophisticated inside the warehouse,” said Karl Siebrecht of Flexe. Robotic installations in the US were up 11% in 2014 over the previous year.

Amazon’s use of robotics prove that automation is more proficient than an all-human staff. Amazon, an e-commerce leader, has about 30,000 robots in its warehouses all over the globe, which created an estimated 20% reduction in operating costs.

Robots benefit e-fulfillment centers and DCs by:

  • Loading and unloading
  • Picking shelves, putting away returned products
  • Handling heavy material
  • Moving products to workstations
  • Packing products

Automation in Transportation

According to Henry Maier, of FedEx Ground, e-commerce is the greatest driver of change and growth in the transportation industry.

E-commerce has considerably shortened truckload’s length of hauls, as shippers build centralized DCs and warehouses for e-fulfillment to be closer to customers for faster delivery.

“Length of haul has gone down a great deal, and one of the unintended consequences of that has been miles-per-truck are down,” said Derek Leathers of Werner Enterprises. He continued, “From 2007 to today, total trucks and capacity are down between 12-15% and miles are down nearly 25%.”

Businesses are under pressure to reduce costs and send orders to customers faster. Since e-commerce sales are unpredictable, flexibility and scalability in transportation strategy is vital. Transportation management systems (TMS) provide shippers with visibility, freight bill consolidation and carrier selection.

Having multiple carrier options permits you to choose the best rates and transit time, which means containing costs and better service.

Since your customers aren’t willing to pay for shipping, but still want their goods as soon as possible, it’s worth evaluating your different choices through a technology platform like a TMS. As order sizes vary, you might consider an LTL carrier. When the customer selects a later shipment delivery, you could choose a carrier with a lower rate but slower route. Regardless of your needs, having more carriers to choose from provides you with more competitive rates.

Benefits of using a TMS: You can automate manual processes, like your BOL. You won’t have delays when your preferred carrier is unavailable, you can simply select a different carrier. You can evaluate various freight rates on the same shipment from multiple carriers. You can track your shipment from origin to destination, you can optimize modes and routes. You can give customers real-time information and improve their experience. You can easily manage historic data and instant notifications. And, you can fully adjust your transportation strategy to fit your e-commerce needs.

Related PLS Logistics Posts:

 

Learn More about PLS PRO Here

Market Update: 9 Factors Determining the Rise in Transportation Rates

Freight shippers are enjoying a buyer’s market at the moment. There’s widespread overcapacity in the trucking industry, forcing carriers to lower prices in an attempt to keep their trucks full. For now, shippers can find low transportation rates relatively easily.

As with any cyclical industry, this will all change. Soon, carriers will be dictating rates and shippers will be competing for trailer space, paying much more for transportation than they are right now.

Why is this happening? And when can shippers expect to pay higher rates?

There are 9 major factors that will determine the severity and timing of the rate hikes.

Operating Costs

  1. When energy prices rebound, it will increase operating costs for trucking companies. In response, they will have to increase fuel surcharges to cover their expenses. Carriers make more profit from fuel surcharges when fuel costs are high, so the surcharge increase won’t be proportional.
  2. Government regulations affect carrier productivity. The ELD mandate, set to start in 2017, is expected to have huge impacts on capacity since almost half of the trucking industry hasn’t installed the technology yet. When trucking companies are less efficient, they have to increase rates to make up for lost revenue.
  3. Reliable drivers are hard to find and require more pay and benefits. Good drivers increase operating costs for carriers, who have to increase linehaul rates to cover the additional cost to hire, train and retain drivers.

Read more about rising operating costs here.

Truck Capacity

  1. Smaller LTL trucking companies are being pressured into lowering their rates, despite steadily increasing operating costs. This will burden the LTL industry, forcing many LTL carriers to go bankrupt or take trucks off the road.
  2. Truckload carriers aren’t expanding their fleets. Truck sales have decreased for 27 straight months, including a whopping 5% decrease in May. Truckload carriers are gaining little to no profit. They are expected to reduce capacity in late 2016 – which could leave the economy without enough truckload capacity when freight demand picks up.
  3. The driver shortage constantly threatens the trucking industry. There are just enough truck drivers to handle the slow freight demand now, but any uptick in load volumes will expose the true shortage.

Read more about diminishing truck capacity here.


Freight Volume

  1. Inventory levels are high right now, but soon they will level out. Flat inventories lead to more aggressive production, which translates to higher freight volumes.
  2. Currently, the U.S. dollar is very strong, creating an import-heavy environment. It is expected to weaken in the near future, dramatically increasing export levels. Higher export levels means more demand for freight services.
  3. The U.S. is near full employment levels. This will create wage raises, which, historically, leads to increased consumer spending levels. More consumer spending translates to higher freight volumes.

Read more about rising freight volumes here.

Key Takeaway

The important thing to realize is this: freight volumes will increase at a time of higher operating costs and lower capacity in the trucking industry, leading to a rapid rise in transportation rates.

Freight demand will bottom out as early as the third quarter of 2016, meaning in late 2016 or early 2017, the buyer’s market will be reversed.

Once these factors start to work in carriers’ favor, the rate hike will happen very quickly. Shippers can prepare by streamlining transportation processes and locking in low transportation rates now.

Click Here for Logistics Management Best Practices White Paper

 

 

 

Declining Inventories: Are Shippers Improving E-Commerce Fulfillment?

The 27th Annual State of Logistics Report shows that inventory levels are down and logistics costs are rising.

Given the extreme demands of the hundreds of millions of online consumers who expect free shipping and fast delivery, e-commerce interrupts transportation budgets and regular shipping strategies. In 2015, transportation costs rose 1.3% year-over-year.

Now, shippers are adding DCs, improving warehouse technology and rethinking traditional inventories in order to meet demand while containing costs.

Retailers, manufacturers and suppliers hold inventory to reduce costs and/or to improve customer service. Having too much inventory can cause excess merchandise to be wasted, and not having enough inventory can leave customers without the products they ordered.

According to the State of Logistics 2016 report

  • Between 2009 and 2015, inventory levels rose about 5% annually, well above gross domestic product growth.
    • These years are typically associated with economic growth, so it’s logical that inventories rose, as businesses restocked, gained demand, and fulfilled e-commerce orders.
  • In 2014-2015, inventories flattened. Projections anticipate an ongoing decline this year and next.

Inventory is a substantial asset in most companies – today, businesses have costly inventory loads. At the end of 2015, inventory value stood at $2.51 trillion. The US inventory-to-sales ratio has been steadily climbing.

Advantages to Low Inventory Levels

  1. Reduced holding costs: Inventory holding costs include everything from the utilities used in the space to labor handling the inventory.
  2. Better management: Less inventory is easier to manage, store and retrieve.
  3. More capital and more space: it can be expensive to carry inventory. Maintaining moderate inventory frees up working capital. Less inventory creates more space, overcoming the need to have extra space for surplus product.

Inventory is a key measure of supply chain management; it determines where supply meets demand. Lower inventory levels reduce acquisition and holding costs, but increase the cost of direct or indirect stock outs.

Shippers are paying attention to the economy – holding excess inventory isn’t an efficient strategy. Overall, companies are better managing and optimizing stocks, reaping efficiency and productivity with accurate forecasting.

Smaller inventories free up cash, space and management. Low inventory levels are not an indication of poor forecasting or inaccurate transportation scheduling. Rather, it showcases a company’s streamlined supply chain management strategy – where processes have been assessed, cycle times have shortened, and the company operates efficiently and productively.

Download Now: Inbound Freight Management Research 

3 Incredibly Simple Ways to Get Better Transportation Rates

Money_Shipping.jpgGetting low rates for transportation services is challenging. The problem is that most people don’t have time to learn the complexities of the transportation industry. And, most people don’t understand the pricing leverage they already have.

For shippers of any size, there are three easy ways to get the lowest contract rates.

  1.  Get to it. Right Now. You’re Almost Too Late.

You need to start looking for a transportation partner right away. Freight rates are primed to surge in the near future, and you’ll want to lock in low contract rates now. Low truck capacity, a shortage of drivers, rising oil prices, aging equipment, rising complexity and government regulations are some of the factors that will make carriers more willing to negotiate with you now.

  1.  Learn to Negotiate Like a Pro – It Only Takes a Minute

You have to know what all carriers want: high volumes of freight that’s easy and cheap to carry. It’s simple. Highlight anything in your distribution network that aligns with those two goals.
On a more practical note, here are some of the best negotiation tips you’ll find for transportation:

  • When negotiating, make sure you’re using all your freight spend for leverage.
  • Make sure your data is accurate and up to date, and have it with you during negotiations so the carrier can picture exactly how they would carry this freight.
  • Highlight good freight qualities: easy loading/unloading, fits on pallets, regular size and weight, warehouse/DC productivity (low dwell times), historically consistent on-time payments, and effective product packaging.
    • Don’t try to hide bad freight qualities – it won’t work in your favor in the end.
  • If you know which accessorials you will be charged for, negotiate a rate ahead of time instead of just waiting to be hit by them.
  • Negotiate with a few carriers, tempting them with all your freight spend, and make sure they know who else is bidding on your freight.
  1.  Use a Free Transportation Management System (TMS)

You can score the major benefits of a TMS by working with a third-party logistics company (3PL). Typically, shippers save an immediate 10% on transportation management when they implement a TMS. A TMS has thousands of carriers in its network, all of whom bid on your freight when you post a load. All you have to do is choose the best one.

 

Learn More about PLS PRO Here

Logistics and Transportation Outlook: More Challenges Ahead

Last month, CSCMP and consulting firm A.T. Kearney released the highly anticipated 27th Annual State of Logistics Report. The report reveals a strong shippers’ market in 2016, a slow rise in transportation rates in 2017, and vaguely states there will be large obstacles to productivity in the future.

With this information in mind, what can we expect the future of logistics to look like?

Current State of Logistics

It is helpful to first look at an overview of the current state of the industry. In 2015, total U.S. logistics costs rose to $1.48 trillion, a 2.6% increase from the year before. This is actually a significant slowdown from the last few years when logistics spending was skyrocketing.

The report concludes:

“Today, the logistics system is sound. Desired services and features are generally available, and a system designed for cost efficiency is delivering pricing favorable to shippers. However, gaps in infrastructure and accelerating trends for speed will increasingly pressure a system that was not designed for e-commerce-driven ‘last mile, last minute.’”

What to Expect in the Future

Inventory levels pass peak levels and decline, revealing improved forecasting ability industry-wide. But, transportation rates are the real story of this year’s state of logistics. Here’s what the authors expect to happen in each mode:

Over-the-Road

The pricing environment for LTL and TL is very different. LTL prices have been rising since April 2016, and rates are higher than they were in 2015. LTL prices are primed for an overall 1.5% increase in 2016, and another 2% increase in 2017. Truckload rates have been tanking. TL prices have fallen 17 consecutive months and are 6.8% below 2014. TL rates are forecast to decline a total of 2.7% in 2016, but then rebound 1.7% in 2017.

Water

Rates have remained at historic lows for waterborne freight transportation, especially for deep sea carriers. The slow economy has not allowed them to increase freight rates yet. Deep sea freight is down 11.8%, coastal and inter-coastal freight down 4.7%, and inland waterways down 4.3%. However, prices are forecasted to see a sustained increase in 2017, rising 2.4%.

Air

Air freight prices have remained strong despite the recovering U.S. economy, for schedule and non-scheduled flights. Air freight rates are projected to gain a total of 0.5% in 2016, and then start to rise in 2017, collecting a 2.9% price jump.

Rail

Rail freight has been suffering low prices for 7 consecutive quarters. Intermodal freight jumped 4.1% in April alone, however, overall rail freight prices will decline 2.6% in 2016. In 2017, a 1.6% price increase is expected.

Key Conclusion for the Future of Logistics and Transportation

It isn’t a simple task to accurately forecast the future of a fast-changing industry such as logistics, but one thing is for sure: transportation rates are going to rise, a lot. Right now, we’re in a shipper’s market due in large part to overcapacity in the trucking industry. Logistics professionals are becoming more adept at managing the complexities of the modern supply chain, as inventory levels and overall logistics spending has decreased.

However, oil prices are recovering faster than most people expected them to, and the price of oil is the best indicator of transportation rates, even though each mode is affected differently. On top of this, government regulations are primed to hurt freight carrier’s productivity, further aggravating rates.

The long-awaited driver shortage still looms over the industry, as every year more truck drivers retire. Aided by regulations, the lack of drivers will constrict truck capacity to a dangerous degree.

Capacity is just enough to meet demand right now, despite the fact the U.S. economy is in a very slow recovery – if freight volumes reach healthy levels, the trucking industry will have full control of the pricing environment.

Only 35% of shippers use a transportation management system (TMS) for freight movement. Without a TMS, shippers miss out on shipment transparency, automated rules and optimization. The transportation industry faces a lot of challenges that will cause rates to sky rocket and will make freight management more difficult.

The State of Logistics Report warns that logistics is entering a new era – that technology and operational constraints threaten to change everything we know about the industry. Despite the recent improvements in logistics management, many shippers, who lack the proper technology and transportation strategy, are woefully unprepared for this.

Request Free Logistics Opportunity Assessment