There has been a lesser availability of trucks across America, which is still expected to persist, affecting freight industry dearly and the result is in the form of rising shipping costs, while the dynamism drenched in economy is such, that it booms into glory now overcoming pandemic triggered halt, but then, the economic sheen is in stark contrast to downfall recorded in the availability of trucks.
“There’s more freight than trucks, or maybe I should say, than drivers,” David Menzel, chief operating officer at freight broker Echo Global Logistics Inc., revealed. He went on to say, “The ports are backlogged, demand is strong, so rates are high. On the other hand, shippers are dealing with high rates, tight capacity and disrupted supply chains.”
General Mills Inc., Rubbermaid-owner Newell Brands Inc. and Bed Bath & Beyond Inc and such other manufacturing and retail hubs have indicated growing costs associated with transportation in their quarterly earning report and also uncovered their hard operational ability to re-house inventories and to meet consumer demand on time.
Making a statement on this, Chris Peterson, who is finance chief and also holds president’s seat to business operations at Newell, said, “We continue to be operating in a very disruptive environment because of container shortages coming from Asia, port congestion, trucking shortages. We do expect it to be a difficult supply operating environment for the rest of the year,”
There has been an increase in orders for new trucks and other equipment from professional trucking services which have also enhanced the drivers’ salaries and have added perks to their earning too, as the transportation industry feels scarcity of skilled driver-power, just like the other industries in the US.
If such a high quantity of cargo remains unchanged, there is fear among operators that descent would be deadly deep just before the holiday season peak arrives when shipping is at all time high.
Bob Biesterfeld, chief executive of C.H. Robinson Worldwide Inc, which is said to be the biggest freight broker in North Africa had an interview, where he opined, “The network itself is just so fragile right now”.
However, if any adverse weather condition contributes to disruption, he outlined, “we could see some pretty chaotic overall truckload freight markets.”
In fact, Cass Information Systems Inc, scanned the index for US freight demand which showed that while the demand rose by 3.4% from February to March but measure for freight expenditure soared doubly at around 6.5% which clearly points to shipping costs.
Talking about the constraints, Mr. Beisterfeld highlights the shortage felt in premium quality semiconductors which remains globally high and limits the production of new trucks. He got data from ACT Research which is transportation data provider firm and where forecast was made that a rise would commence in net Class-8 trucking capacity, from 3% to 3.5% in current year, while C.H. Robinson foresees truckload volumes to rise by 8% to 12 %.
Mr. Biesterfeld puts forth, “It’s just been this constant increase in the cost of purchased transportation at a rate that’s really something that we’ve never seen. It’s just been this whipsaw effect to the overall market…We just haven’t been able to find equilibrium.”
To the middlemen, like C. H. Robinson, that is based in Minneapolis, the struggle for capacity is not lesser than any advantage, as it links a wide class of manufacturers and retailers with truckers, which also include independent drivers and small operating groups.
To emphasize this, C.H. Robinson’s Q1 revenue showed a handsome increase of 26.30 % that is $4.8 billion, which also includes 13.70% additional revenue in Surface Tranportation Segement of North America. Then, the per mile cost for truckload freight also showed a quarterly increase by 33.50% as compared to earlier quarter in 2020 which is still expect to be on the growing spree, in reports to be uncovered.
Echo Global also unveiled the 45.30% jump in its quarterly revenue which falls around $800 million as was calculated in similar time-frame.
Whatsoever, majority of trucking companies feel a bit gloomy while considering any kind of capacity boost in coming months.
‘It’s just been this constant increase in the cost of purchased transportation at a rate that’s really something that we’ve never seen.’ — C.H. Robinson Worldwide CEO Bob Biesterfeld
Green Bay, Wis-based truckload carrier Schneider National Inc. has been able to achieve its critical goal of adding its over-the-road fleet to around 6000 trucks while the number saw a dip last year, due to hardships in hiring. Now, their Chief Executive Mark Rourke highlighted in an earnings call last week that constraints on capacity and subsequent earning opportunities for growth, simply rendered 5,500 “a more appropriate target”.
At Schneider, they were able to surpass expectations of analysts, in case of Q1 earnings and in its logistics business, it recorded a revenue hike of 49%, which links shippers with truckers fall under third party category.
At Werner Enterprises, which is a large carrier, based in Nebrasks, Omaha, freight brokerage also drove Q1 gains as company, in its logistics portion, reported 23% growth in revenue, as compared to similar time frame in 2020, while the overall revenue made an increase of around 4% that is $616.40 million.
Going by their statement, “We know how tight this market is,” Werner Chief Executive Derek Leathers said in a Wednesday earnings call. “I don’t think that you’re going to see any capacity relief coming in 2021.”