Surviving & Thriving With Lower Freight Volumes
For today’s post, we’ll be revisiting some aforementioned topics; most notably, container volumes, the rate market, and capacity. The only difference in this instance is that we’ll be talking about how these things all relate to one another and offering some insight as to how growing businesses looking to improve supply chains should be thinking. Or - at least how we’re thinking here at PortPro.
The short of it is that rates continue to fall. Pandemic highs, whereby the cost of shipping a container from China to North America cost upwards of $20,000 or more coincided with market growth from real estate to securities to commodities. However, those days are long gone. According to Freight Waves, west coast rates have plummeted ‘93% since September 21, 2021’. East coast rates are down ‘84%’ and global rates are down 75% on average. Good news for some, as many see this as a market correction more than anything else. The reason for these drops should be fairly obvious by now - FED rate hikes have stalled or slowed investment, inflation has impacted the purchasing power of consumers (although consumer spending and debt remain notably high), and economic outlook remains cautionary at best. As such, companies are preparing for a world where people spend less, at least for a time. That, combined with the bottlenecks seen at the San Pedro Bay Port Complex that drove vessel calls east and south, result in less spend, which in turn results in less goods needing to be shipped overseas, and so on and on. It’s a matter of supply and demand.
So, how does all this relate to motor carriers, brokers, expediters, and BCO’s? The answer is related to the fact that competition will intensify for a scarcity of work. Capacity was a problem during the pandemic rush, but the name of the game has shifted. BCO’s have fewer containers and goods to ship and thus, brokers will have less work to manage, and LMC’s will have fewer opportunities for earning new business. It’s a hard problem, but the best and most effective of each of these entities will survive - and thrive - in a continued economic downturn as some level of goods will always need to be shipped. Examples are plenty, but a BCO would rather work with a digitally enabled broker that works with their LMC’s in a modern, API driven way opposed to dealing with phone calls, emails, and EDI. This allows for automatic updates, status sharing, documentation sharing, and communication (supply chain visibility) in near real time. The BCO that gets to work with a digitally enabled carrier will continue to place stock in that relationship because it will make the lives of their staff easier. The same can be said for the next level up via the relationship between broker and BCO (or even LMC direct to BCO).
While consumer product companies and some BCO’s have largely avoided the layoffs that have plagued technology companies, they too will cut back on staff if need be. A previous post of ours illustrated how PortPro partners can do more with less. We won’t rehash those ideas here, but we will reiterate the aforementioned poignant purpose of this article - given a simple supply and demand equation, supply chain operators will compete for businesses more ferociously. Those organizations - from BCO to broker to LMC - with tools to derive efficiency and automation akin to next level customer service will not only survive, they will thrive.
PortPro is delivering this exact thing today with drayOS and other products. Tools to automate your business, reports to satisfy your customers, automatic invoicing, digital status updates (automated in real time), digital load tendering, customer portals, automatic emailing, driver settlements, etc… the list goes on and on. Our carriers are the carriers of today and our partners at the broker level and up to the BCO level are experiencing cost and time savings that will allow them to better operate their supply chain in or out of an economic downturn, save their staff time and headaches, and allow them to do more with less.
Check out our site or schedule a demo today to see how PortPro can help service efficiencies in your business.
-Walker Banks, VP of Strategy & Business Development