Seizing new opportunities in a soft freight market: Insights for shippers
ByJenny Vander Zanden
August 17, 2023
Transportation leaders have experienced years of market volatility characterized by inflated costs, labor shortages and geopolitical disruption. Caught in this whirlwind, shippers often found themselves in crisis mode, relegating strategic planning to the backburner as they constantly put out fires.
Now, market conditions are easing, painting a much rosier picture for shippers. With spot market rates falling and 59% of transportation leaders predicting freight capacity to remain more available over the next 12 months, the soft freight market provides new opportunities for shippers to refine their transportation strategies. And the time to seize these opportunities is now.
The dos and don'ts of navigating a soft freight market
If your strategic planning took a backseat amid market turmoil, you’re not alone. But now that stressors like limited carrier availability and high fuel surcharges are easing, it’s time to shift your focus back to long-term strategy and growth. Failure to do so doesn’t just hinder your ability to adapt to market fluctuations — it also limits opportunities to improve sustainability, enhance efficiency, and reduce costs in your network.
But as you refocus on strategy, there are several common pitfalls you’ll need to avoid:
DON’T: Be complacent. Now is not the time to rest on your laurels when it comes to your transportation network strategy. Although your current approach and carrier selection process may seem satisfactory, you could be overlooking opportunities to make adjustments to your network — both at the lane-level and network-wide — that have high-dollar impact and mitigate future network challenges.
DON’T: Engage in excessive partner consolidation. Carrier partner consolidation typically simplifies relationship management in the short term. However, overconsolidation is risky because it limits your flexibility and ability to accommodate increased demand when market conditions shift. So it’s important to maintain a balanced approach between carrier partner consolidation and diversification.
DON’T: Rely solely on the spot market. Low spot rates offer a cost-effective way to transport products to market in the short term. But bear in mind that relying solely on the spot market may not yield long-term benefits or stability with carrier partners.
There are also plenty of proactive strategies you should pursue to optimize your network. Whether it’s strengthening mutually beneficial transportation contracts with current partners or establishing relationships with new carriers that align more closely with your efficiency and emissions reduction goals, investing time in these partnerships will help position you to navigate future market fluctuations.
DO: Leverage data-driven insights. Current carrier partners might seem like a good fit. But it’s nearly impossible to know without access to comprehensive data that provides a view of lane-level performance and a comparison against the industry benchmark. By benchmarking your infrastructure against your wider transportation ecosystem, you can identify otherwise overlooked opportunities — like seemingly minor lane-level changes — that can yield significant cost savings and emissions reduction.
Advanced benchmarking solutions offer actionable insights that align with your long-term strategy, including the identification of optimal carriers. By cultivating relationships with these best-fit carriers, you can lock in preferential rates. According to Breakthrough data, shippers and carriers in “growth relationships” typically secure rates that are 2.75% (or $0.08 per mile) lower than other carriers, unlocking considerable cost savings over time.
DO: Initiate sustainability conversations. With looming climate legislation deadlines and public pressure driving the need for more sustainable practices, it’s crucial to identify carriers that share your commitment to emissions reduction. Begin by establishing your sustainability criteria for carrier partners with internal stakeholders. Then, communicate your goals and expectations with carriers upfront, and ask about their plans for emissions reduction to ensure the partnership is a good fit.
It’s also wise to consult with a third-party transportation management technology partner to help track your scope 1 and 3 transportation emissions and validate that your partnerships are supporting your emissions reduction efforts.
DO: Use the spot market with intentionality. Rather than haphazardly relying on the spot market purely for its cost-effectiveness, develop a data-driven approach to leverage the spot market for specific lanes or business segments when it complements your long-term strategy. Most importantly, make sure you have a backup plan when the market shifts and spot rates rise.
Move beyond short-term gains and embrace long-term growth
As you navigate the second half of 2023, prioritizing the proactive development and reinforcement of carrier relationships is paramount. Embrace opportunities in today’s soft freight market to reevaluate strategic priorities, fine-tune emissions reduction goals, and leverage data-driven insights to identify optimal carriers for your network. By shifting your focus from short-term wins to long-term growth, you can forge a robust transportation strategy that withstands the test of time and safeguards your organization from future market fluctuations.
Schedule a demo of Capac-ID to learn how you can leverage data-driven insights to optimize your transportation network strategy.