Fun with Freight

In case you missed it, freight rates are going up.  Below is a graph of indexed LTL rates (less than truckload shipments) over the last five years.

https://fred.stlouisfed.org/series/PCU4841224841221

Here is an excerpt from a recent Wall Street Journal Article highlighting capacity issues in the truckload market.

From the WSJ 1/5/2018 https://www.wsj.com/articles/tight-trucking-market-has-retailers-manufacturers-paying-steep-prices-1515150000

By the end of last week, just one truck was available for every 12 loads needing to be shipped, according to online freight marketplace DAT Solutions LLC. That is the most unbalanced market since October 2005, after Hurricane Katrina, and compares with a roughly 1-to-4 ratio at the end of 2016.

Some companies are delaying nonessential shipments rather than scramble to find a truck. Others are paying a premium to ensure big rigs will be waiting at their warehouses when they need them. The cost to hire the most common type of big rig shot up to $2.11 per mile, including a fuel surcharge, in the week ended Dec. 30, a 3½-year high, DAT said.

Virtually every product we buy is on a truck at some point in its life.  Increased economic activity and changes in regulations are leading to capacity constraints in the freight industry.  Capacity constraints lead to price increases.  In addition to worrying about costs, it is time to start worrying about lead times and transit times for freight.  As I’ve written in the past, it does not matter what you pay if you do not have the product.

We’ve lived in a low-inflation economy for a long time.  That trend is showing signs of changing.  Start talking to your customers now about freight prices and capacity.

 

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