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The past few years have been incredibly volatile where transportation costs are concerned. Even before the pandemic, we saw wild fluctuations in fuel pricing, tariffs, embargos, and all manner of uncertainty in global trade.
Once the pandemic took hold, demand increased, capacity decreased, and we’ve been dealing with unprecedented container shortages, all of which contribute to the current trends in transportation costs.
Profitability hinges on having visibility into what’s happening in transportation and how these events are affecting service and costs. Now, more than ever, you need strong partnerships with providers you can count on—and a couple of backup plans in case things don’t go as expected. To stay on top of costs and what’s driving them, your strategy, compliance, and performance must be reviewed continuously so you can change course quickly if indicated.
Transportation Trends to Watch in 2021
Here are some of the top trends we expect to see for the remainder of 2021 and into 2022. These situations are ongoing and likely won’t change significantly until ports begin to open up in South China and container inventory redistributes.
- Capacity demands push rates higher for full truckload markets. The global container shortage, labor shortage, and increasing capacity demand are creating delays and pushing smaller shipments into LTL lanes. Intermodal options are more challenging as transit times and rates continue to increase.
- Costs continue to increase while service declines in LTL, driven by capacity challenges and targeted embargoes still in place. Add to this the widespread labor shortage that’s affecting both drivers and dock workers. Parcel service levels are in crisis, pushing more volume to LTL through freight consolidation, and surcharges continue to trend higher.
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- Small parcel carriers anticipate holiday peak with no added capacity. The ecommerce explosion of the past year has consumed all available capacity, heralding a challenging seasonal surge as carriers struggle to meet the demand. Even with on-premise retail coming back, most analysts expect this trend to continue.
- International shipping still bears the brunt of the pandemic. Global supply chains continue to see disruption, fueled in particular by port closures in Southern China. Demand will continue to rise as capacity, and container supply continues to diminish. U.S. port congestion is starting to ease up, but it’s still challenging and expected to remain through 2022.
- Demand for air freight is at its peak, increasing costs and creating capacity issues that will only worsen as passenger flights return. As a result, any contingency plan you had that involves international air freight is limited and certainly not guaranteed.
- Fuel prices are driving up costs everywhere. Diesel fuel prices rose more than 32% since November 2020, directly affecting transportation costs. We’re seeing a steady increase month over month, and fuel surcharges will continue a factor for all over-the-road freight in the foreseeable future.
At DTS, we work hard to meet today’s challenges so we can continue to serve our customers with the highest possible level of service. We’re always watching the trends and innovating ways to optimize operations and reduce costs so we can pass along those benefits to you.