It’s been a record setting year for supply chains. And with such a momentous Q1 2021, shipping markets aren’t going to settle anytime soon.
The top parcel carriers are making some big infrastructure investments, after the major surge in parcel volume in 2020. With a projected 27% increase in retail imports in 2021, carriers don’t want to be caught off guard again.
“UPS is expanding Saturday delivery from 75% of zip codes domestically to 90%. You’re going to start seeing a lot more brown uniforms showing up at your door on Saturday morning.” says Brad Hollister, CEO of SwanLeap.
FedEx continues to double down on the strategy of servicing all ecommerce except for Amazon. By partnering recently with Adobe, FedEx made an announcement that it is offering services to all Adobe ecommerce customers.
USPS is trying to keep up with the demand as well. USPS has announced that they’re going to be adding 138 new sorters and 45 new overflow facilities. The Post Office has announced that the new sorters and new overflow facilities will be in place in time for the holidays. Hopefully for all carriers this is enough, but keep an eye out on the regional carriers growth as well to handle excess capacity and to offer niche services to rural areas.
On the freight side, the first week of May is Blitz Week (formally known as International Roadcheck), where road inspections on trucks increase throughout Canada, the U.S., and Mexico as set by the Commercial Vehicle Safety Alliance (CVSA).
“There’s a lot of reasons for that,” says Hollister. “There’s freezing and thawing on the roads, so different states are trying to protect those roads. It does, traditionally, offer a little more risk to carriers to put all their trucks out on the road, so look for delays as drivers are subject to these inspections. Also watch for carriers taking back a little capacity to not put all their trucks on the road and make them all subject to inspections and violations.”
This economy continues to get hotter. Demand is ramping up: one out of four load tenders have been rejected by carriers since September 2020. This means carriers have more loads than available trucks. Contracted tender volume is up 31% year-over-year and the tender rejections are up 60% year-over-year, “but this is a very difficult time to measure because we were facing some unprecedented times with the pandemic,” advises Hollister. “[60% is] definitely a skewed number because there was a tremendous drop in demand in the second quarter [of 2020] so trucks were easy to find. Now it’s back to [about] normal, which makes the number look more alarming than it really, truly, is. 20% tender rejection is probably a good forecast to use.”
And to our neighbors and friends in the South — produce season is here! We all know what that means: there’s a ton of trucks and demand for trucks, especially on the refrigerated side. We need refrigerated trucks in the south to haul the produce up so we can be enjoying those fruits in the north and throughout the rest of the country. Reefer rejections were about 50% in March of 2021, dropping to about 40% in April of 2021. “It’s still pretty high if you need a reefer truck.” the SwanLeap CEO cautions. “You’re going to have trouble finding a reasonable price that you might have budgeted and/or trying to find carriers to haul loads.”
“On the truckload side, we’re seeing tender rejections very high compared to historical numbers,” says Brad Hollister. “We’re seeing more loads than trucks available, so it’s important that you consider alternative strategies, now more than ever, in looking at the spot market — not beating up carriers on price because they don’t need you. We need to find the right carriers that need your freight at that moment to haul the freight at a rate that’s going to be in line with your budgets and your expectations.”
“The nationwide spot market rate is sitting at around $3.15; the customers that have used the SwanLeap Marketplace to find the right carriers are paying substantially less than that,” Hollister says. “Again, not an attack on the carriers by any means, but about matching up the freight to allow carriers a more predictable transit network and also to find loads that meet what the carriers need to make their other commitments to their other customers.”
Truck orders are always an economic leading indicator to keep an eye on. When truck orders are high it means that it’s a function of rates being high and capacity scarce, and we see the cycle as truck orders dip and then the market starts to cool. “We’re still seeing truck orders tremendously high because nothing has changed; these truck manufacturers can’t get components they need in their supply chain to make the trucks roll off the assembly line and get into the hands of truck drivers.” explains Hollister. Truck orders still remain high — still very much unfulfilled compared to the demand — which gives us an indication that we’re going to continue booming and capacity is going to continue to be scarce for some time in the future.
Consumer products are sold out everywhere. Consumer spending is up 26%. Retail imports are forecast to continue to boom as money is available for everyone. Interest rates are low, stimulus checks are in the bank, that’s going to lead to continued tightening of capacity. Demand is high, goods need to be moved to meet these consumers demands, ports have still remained congested, and getting those shipments out of the ports and products into the hands of the consumers is vital right now. Keeping an eye on that as a really important metric to watch how consumer spending has really driven the demand for trucks and putting goods on those trucks.