The state of the freight transportation services landscape is subject to massive volatility. This is especially true as the industry moves further into the busiest peak season in history. Since the onset of the pandemic, e-commerce has grown, amassing more than a decade’s growth within mere months.
Meanwhile, The Wall Street Journal reports, “domestic shipping rates for moving goods by road and rail in the U.S. are up about 23% this year from 2020.”
Expectations for Capacity and Freight Transportation Rates in 2022
Rail transportation rates are still spiking
- According to the Association of American Railroads, forecasts for 2022 project a slight decline from the current indexed values of 112.4. That sounds like an improvement. However, it’s still nearly 10% higher than in 2017 and 8 points above the 2020 peak levels.
Both LTL and FT Transportation Rates Will Remain Higher
- As reported by Supply Chain Quarterly, 74% of truckers expect rates across LTL and FT to rise in 2022. Simultaneously, fuel surcharges are rising, and experts predict the tightest capacity crunch in generations will come in 2022.
Parcel Service Rates Are Also Moving Upward
- The major parcel carriers, FedEx and UPS, have rolled General Rate Increases (GRIs) near 4.9% in recent years. However, the unrelenting demands of e-commerce have created a new strain. In addition to the existing pandemic-influenced peak trucking rates, shippers must now face above-average GRIs. FedEx set GRIs to take effect that range from 5.9% to 7.9% depending on the zone, according to Intelligent Audit. UPS is following a similar trend.
Trucking Fuel Costs Are Expanding
- Trucking fuel costs also show a likely upward trend that will last through 2022. According to the U.S. Energy Information Agency (EIA), trucking fuel costs are $1.09-$1.43 higher than the week preceding Christmas 2020. Now, rates appear to be slipping a few cents week over week, but the overall trend is evident by this chart:
All Transportation Modes, Air and Ocean, Are Experiencing Shortages
- COVID-19 continues to impact both air and ocean freight capacity. According to Accenture, global international air cargo capacity increased 2% at the beginning of December 2020. However, the overall capacity is still 5% lower than in 2019. The Drewry Port Throughput Index is also changing rapidly. Following a deep dive in January 2020, container throughput is nearing 140 on the index. More troubling, the global 2-year change is up 4.1%
The Solution: TMS Advancements Will Create New Opportunities to Add Value
Creating more value in the supply chain depends on using an advanced TMS to improve operational efficiency. This is especially important as market dynamics remain in place. Less than two weeks ago, Central Freight Lines filed for Chapter 7 bankruptcy, putting the holiday freight plans of thousands of shippers at risk. FreightWaves reported additional increases in rejection rates in Chicago.
TMS Users Look to End-to-End Controls for Improved Sustainability and Better Delivery Experiences
Automation Will Define the Future of the Supply Chain
Automation, Actionable Analytics, and End-to-End Visibility Support Efficient Operations
As for overall growth, there will be considerable ongoing interest in cloud-based management, including applying a central control tower and creating a new way to gain insight into all modes across both forward and reverse logistics.