A new report shows that truckload and intermodal prices are rising, but partnering with an ISP or 3PL can help retailers balance logistics costs.
As global economic activity surges in the wake of the 2008 financial crisis, growth across the shipping and logistics industry has caused truckload and intermodal prices to rise. In the most recent editions of the Truckload Linehaul Index and Intermodal Index from Cass Information Systems and Broughton Capital, data shows that the booming e-commerce economy and the changing nature of fulfillment have reduced capacity for carriers and led to higher prices across the board.
As greater demand — driven in large part by e-commerce fulfillment — places a strain on the nation’s carriers, e-retailers shouldn’t be surprised to see rising operating costs as well. While shippers working on their own may be footing the bill, those who partner with experienced logistics providers can get the most bang for their buck with cutting-edge fulfillment solutions that make the most of every shipment.
Understanding Higher Truckload Prices
According to the Cass Truckload Linehaul Index, truckload rates grew 9% in May, which represents the “strongest percentage increase yet in this recovery.” This shows a steady rise from April’s 8% increase, as well as sustained growth in November (6%), December (6%), January (6%), February (6.5%), and March (7%).
Truckload rates have risen annually for 14 straight months, and the trend doesn’t show any signs of slowing down. “Our realized contract pricing forecast for 2018 is 6% to 8%, and current data is clearly signaling that the risk to our estimate may be to the upside,” said Broughton Capital Managing Director Donald Broughton.
The increase in truckload pricing is likely due to several factors, including the price of WTI crude at over $65 per barrel and the reacceleration of the industrial economy, which is providing alternative jobs for truck drivers.
The consumer economy is also growing at the fastest pace since the Great Recession, and the number of bankruptcies have reached a historical low. Many experts believe that electronic logging devices (ELDs) that record compliance with hours of service (HOS) requirements are in part responsible for rising prices, as well.
Intermodal On the Rise
For intermodal transport, pricing rose 9% in May and 6% in April, preceded by smaller increases in the previous nine months. Broughton believes that the correlation between truckload and base intermodal pricing indicates that intermodal rates won’t be coming down anytime soon.
Understandably, the convenience of intermodal transport is attractive for shippers looking to avoid road-only logistics solutions. As truckload spots become more and more expensive, an increasing number of businesses are investing in intermodal strategies that make the most of ocean, air, road, and rail together. Of course, the rising popularity of intermodal as an alternative is making it more expensive in and of itself.
What This Means for E-Commerce Sellers
According to a report from Armstrong & Associates, e-commerce logistics costs in the U.S. now account for nearly 7% of total logistics spend — an increase from 2016’s 5%. As the e-commerce economy continues to grow, this percentage is only going to rise. So how can e-retailers continue to maintain demanding delivery times while keeping prices low?
By working with an experienced third-party logistics partner (3PL) or integrated logistics services provider (ISP), it’s possible to navigate rising operational costs strategically and cost-effectively. Thanks to cutting-edge software that efficiently manages fleets and organizes warehouses, industry partnerships that can secure competitive pricing, and expertise in less-than-truckload (LTL) shipping, businesses partnering with 3PLs and ISPs can scale confidently without spending unreasonably.
With over two decades of shipping and logistics experience, Primary Freight has the resources to drive value for your business and optimize your supply chain. Our team offers personalized support, as well as top-of-the-line facilities to accommodate your fulfillment needs. If you’re looking to consolidate shipments, expand your supply chain, and enhance your logistics strategy, Primary Freight is standing by.
To learn more about Primary Freight’s award-winning shipping and logistics services, call us today at (800)-635-0013.