Peak thoughts come out of the ‘Code Red’ webcast

While we all know 2020 is truly a year unlike any other, there are many themes that are indicating that will also be the case for this year’s Peak Season. That was made clear on the “Code Red” webcast hosted last week by NASSTRAC, CSCMP, and TranzAct Technologies. 

The webcast, which was moderated by Mike Regan, TranzAct’s Chief Relationship Officer, featured an excellent panel, including: Avery Vise, VP of Trucking, FTR Transportation Intelligence; Geoff Muessig, CMO and EVP, Pitt Ohio; Eric Fuller, President and CEO, U.S. Xpress Inc.; and Jerry Hempstead, President, Hempstead Consulting. 

In terms of what to expect for the 2020 peak season, from a truckload perspective, Fuller was direct, saying he expects it to be the tightest peak season on record. And he made it clear that securing capacity is at the top of the list for shippers, with this caveat: “If you don’t already have your peak season capacity locked down, I think you are in trouble. I think you are going to be in a situation, in that things are going to increase from here and when we get into peak, I don’t know if you are going to be able to buy capacity; it is going to be that tight.”

It is hard to be more direct, and for those that think it may sound harsh, I would disagree. It is an honest assessment is all. 

Muessig weighed in from the LTL side, with the observation that over the last 15-20 years LTL carriers have been complaining that truckload carriers are taking their heavyweight [loads] and small package carriers are taking the minimum charges. 

But things are clearly different now, make no mistake, according to Muessig.

“Amazingly, in 2020, that situation has reversed and this business has cascaded back on both ends to carriers,” he explained. “That is another reason why that demand is strong in LTL networks today. Heightening that is the capacity crunch in the small package space—you are only going to see more hundredweight and multi-weight shipments get pushed across, as the small package carriers have already put in seasonal caps. That is already out there 

What’s more, he added that this is a situation that could become more difficult, with a significant percentage of small package capacity for a period of time expected, at some point, to be diverted to vaccine [delivery and shipment efforts] dispersion, which he said is “absolutely necessary and should be prioritized,” adding “that would only stand to reason that the LTL network would get even busier.” 

On the parcel side, moderator Regan observed that the duopoly of UPS and FedEx previously installed peak season surcharges and also imposed a surcharge on some of their highest volume customers if they exceeded the volumes by a certain factor from February.

And Hempstead noted that a parcel carrier recently said that it expects to be at 130% of capacity during peak, a staggering statistic.

“The balloon is going to burst, and shipments are not going to be delivered on time,” said Hempstead. “The question is how bad are things going to be backed up and when can carriers dig out? They are doing what they can to hire people but you cannot just build a sort center either.” 

FTR’s Vise addressed truckload trends, with a forward-looking approach to what may in store over the first half of 2021. 

Vise said he expects the retail environment to stabilize by the first quarter, while stating that this situation is very different than peak activity in 2018. 

“We had this big peak in 2018 in the middle of the year, which is not where we are here,” he said. “We are running at peak levels going into a peak level so one of the things we are going to see is that the holidays are going to extend into January…you are not going to be able to deliver everything. Remember we have a lot of reverse logistics, and that is going to also get pushed off, I think, and so we are going to be looking at a January and February, in which that will be a factor due to how tight things are this year. You almost have an echo effect, if nothing else, even if the underlying sales numbers don’t hold up.” 

As for needed strategies to navigate this year’s extreme peak season complexities, Muessig made the case for shippers to strategically align with their carriers.

“At Pitt Ohio, we have made a conscious decision to prioritize with our existing customer base; we recognize how busy it is out there and it is only going to get busier,” he said. “We need to be disciplined and devote our resources to existing customers and not let our eyes wander afar on what we perceive to be new greener, better opportunities. If you rely on a carrier that takes that disciplined approach, you are going to have your best chance of success—the service may still not be quite what you want and we are taking steps to drive that service even higher, but that is your best defense as a shipper

And Fuller was on board with that sentiment, saying that U.S. Xpress strives to have long-term relationships with shippers. 

“There are a lot of factors that go into it, and rates are not 100% of the factor in terms of whom we are going to do business with and at what scale,” he said. “A lot of it is how they treat the driver and the driver experience at both the shipper and delivery location, and we are starting to use technology to aggregate all of that data from our drivers.”

That data can provide a plethora of information, for these locations, too, he said, including: how long they take to load a trailer or unload a trailer; are they matching the appointment times or are the drivers getting tied up getting to the gate? And U.S. Xpress is aggregating what it calls crowdsourcing from its drivers with the drivers telling the company about the location and also rate each one

“What that is going to tell us is that we are going to be prioritizing those shippers that strive to treat drivers better, provide more resource and bathrooms and break areas and allow drivers to stay on their lot overnight and those that are a bit more difficult to do business with we probably be deprioritized; it is not just us, it is the overall industry moving to that model,” said Fuller. 

Again, there are so many moving parts within freight transportation and logistics these days, that much is obvious. This webcast took a deep dive into many of the key issues and provided some terrific context for attendees to get a firm handle on the current market landscape and what may be coming next.