Shippers face “significant” rate increases in the U.S. over the next few years unless they build more multimodal supply chains for domestic and inbound shipments, an investment analyst warns.
Although he expects U.S. economic expansion to remain slow, restraining the rate of growth in freight demand, rising operating costs and regulatory pressure mean truckload capacity will get tighter, said David G. Ross.
“We believe capacity restraints should ultimately drive pricing higher, but we do not know when,” Ross, managing director of transportation and logistics research at Stifel, said in an Aug. 23 note to investors.
Regulatory changes, from stricter hours of service rules for truck drivers to mandatory use of electronic logging devices, are likely to put more cost pressure on trucking operators, further tightening capacity. Supply-driven rate hikes will probably be more significant than we have seen in about seven or eight years,” Ross said in the note, looking back to the 2004-2005 expansion.
Shippers will most likely be unable to avoid all of these increases,” he said. The best relief won't come from haggling over pricing or switching carriers, but from looking at strategic alternatives.
Those alternatives include intermodal rail but also broader modal optimization, greater use of 3PLs and load consolidation, and collaboration with carriers and other shippers to share and ultimately reduce freight costs.
"We think that collaboration is going to be more important than beating carriers up over the rate per pound or rate per mile calculation,” Ross said.