As GDP drops, capacity tightens.
What does this mean for shippers?

There is no doubt that COVID-19 has had a very real impact on our economy and shippers. The U.S. gross domestic product (GDP) fell an annualized rate of 32.9% in the second quarter of 2020. This is the largest decline on record, surpassing the financial crisis of 2008 which was 8.4%. 

https://www.cnbc.com/2020/07/30/us-gdp-q2-2020-first-reading.html

Some industries, such as saw revenue evaporate instantly, while other verticals like retail goods, fitness, and home improvement, saw revenue spike. This sudden shift in the economy had a major impact on carriers, as they saw some guaranteed volume come to an immediate halt. Carriers had to park their trucks or close doors to adapt to this shift and, as a result, shippers have experienced a tightening of truck capacity and an increase in rates on the spot markets.

What’s next for shippers?

While the ripple effects will not go away overnight, there are clear signs of an economic rebound. The largest movie theater chain, AMC, reopened its theaters in late August and in May homebuilders saw the strongest sales month in over a decade. So, we identified the Top 4 actions you can take today in preparation for the V-Shaped economic rebound that many are expecting to take place by the 4th Quarter.

  1. Look for consolidation opportunities within your loads. Do you have multiple LTL shipments going to the same region within the same week? While you may not be able to consolidate every load, this check can give you some easy wins.

  2. Connect with your core carriers and increase volume to your top 5. Your carriers would love to have your volume. As spot prices trend, you can mitigate the wild swings by shifting more volume to your top 5 core carriers. Increasing the volume with fewer carriers gives you opportunities to gain more competitive pricing as carriers or brokers might be willing to reduce their margin in exchange for an increase in overall volume.

  3. Consider if a 3rd Party Logistics Provider (3PL) can move the needle. As shippers became leaner, they are doing more with much less, and a 3PL provider might provide a meaningful impact on your day-to-day. Teaming with a 3PL immediately increases your negotiating power and some 3PL providers can provide you with technology to increase your efficiency. A fully integrated TMS can automate most of your repetitive tasks, giving you back valuable time.

  4. Consider a Hub-and-Spoke Model to increase consolidation opportunities. If you are shipping primarily LTL one way to combat increasing prices is to ship more effectively by utilizing a Hub-and-Spoke Network. This would involve identifying warehouse space or 3rd Party Warehouses in areas where you have clusters of customers. If executed, you can convert multiple LTL Shipments into Full Truckloads to the regional warehouse and then create smaller LTL or Milk runs to your customers.

While COVID-19 has had a major impact on every business, one thing is clear, you must focus on what you can control. You need to continue solving problems and creating new opportunities to increase efficiencies and reduce costs where you can. While the freight industry can seem chaotic, now is the perfect time to identify areas you can improve on and act. These improvements will not only provide short term gains, but it will also help you thrive when the economy fully recovers.

At Dynamic Logistix we are boldly changing logistics management, one client at a time. Our Tier 1 TMS program includes a leading Cloud-Based TMS that streamlines freight logistics from order entry, load building, route optimization, and carrier selection. We offer our clients 24/7 visibility, ERP integration, freight audit and pay, business intelligence reporting, and dedicated account managers Dynamic Logistix is eager to help your company save money and time. Click here to schedule a complimentary process review with our logistics team.

7220 W 98th Terrace, Overland Park, KS 66212
913-274-3800

Follow us

© Copyright Dynamic Logistix | Website Design Firm