Editor’s note: This is the first of a two-part series on how events in 2020 have created near and long-term shifts in the capacity strategies for shippers, carriers and 3PLs. Part 2 of this series will run on Wednesday, Dec. 2.
Pricing power in the freight market moves like a pendulum, and in 2020 the buyers (shippers and 3PLs) and sellers (carriers) of transportation capacity have seen the direction change multiple times.
Buyers gained an unexpected pricing advantage in the first and second quarters when capacity flooded the market from hard-hit sectors like automotive, manufacturing and foodservice during the COVID-19 lockdowns.
Capacity tightened in the third quarter as a V-shaped recovery began for truckload, less-than-truckload and final-mile shipments. The recovery spiked in August and was primarily driven by consumers increasing their spend on physical goods in place of entertainment, travel and services.
FourKites, a freight visibility provider, reported that shipment volumes from January to October have increased by an average of 22%. Much of that growth came in the third quarter, with a peak in August for retail and manufacturing shipments.
The shift in consumer spending accelerated online purchases by five years, according to IBM’s U.S. Retail Index, and created a surge in residential deliveries. UPS Ground’s residential volume, for example, increased by nearly 64% from April to June. Parcel carriers responded by limiting customer shipping volumes and adding residential delivery surcharges.
Truckload and LTL carriers also saw freight surge in the spot market, which has presented new challenges for shippers and 3PLs to secure capacity commitments. As capacity has tightened, carriers are finding new opportunities to drive efficiencies and asset utilization.
