Freight for Thought: Three Ways to Manage Transportation Trends in 2017
*This article was featured in the November Associated General Contractors of Missouri (AGCMO) Supplier Tips blog on November 23 but is most certainly applicable to any industry regularly shipping truckload or LTL freight.
By Mick McGrory, Vice President, Strategic Accounts.
Jobsite and construction transportation should brace for three overarching trends in the new year; trends that will impact the pricing and costs often overlooked when budgeting for 2017 projects. Contractors should heed these predictions and look to their logistics providers to help manage the following:
Freight Rates
For most of 2016, construction shippers experienced a buyer’s market when purchasing transportation services. Demand in the overall transportation market is soft, with rates declining YoY and equipment capacity plentiful.
These market trends should continue into the first half of 2017, with the occasional holiday and weather spikes due to capacity and road conditions. Based on projected economic growth, the second half of 2017 could see some rate increases as transportation companies prepare for upcoming federal trucking regulations that will impact the entire transportation industry. Current projections show the potential for domestic trucking rates to increase 3.5-7%, with international shipping rates increasing from 7.5-15%. Prepare for costs to go up and ensure your budgets reflect a forward-facing strategy to manage price swings.
Fuel Surcharges
In 2016, consumers benefited with diesel and gas prices that remained low and yielded additional savings. We saw the price per gallon for unleaded gasoline dip under $2.00 for the first time since March 2009. From July 2015 to July 2016, the cost of diesel has dropped on average $.40 per gallon.
Since healthier economies induce greater demand and increased fuel consumption, the projections for 2017 show a 10-13% increase in diesel costs per gallon. Current forecasts project the average cost per gallon of diesel in 2017 at $2.69, which is $.35 higher than 2016.
We can expect that construction shipper’s diesel and unleaded gasoline prices will be closer to 2015 levels, and a significant increase over costs in 2016.
Transportation Technology
Is visibility to your shipments causing problems on the jobsite? You’re not alone – only 35% of shippers use a transportation management system, or TMS, to monitor their freight.
The importance of transparent transportation communication and inventory systems cannot be overstated when minimizing lead times for contractors, now more than ever.
The construction industry is requiring more administrative and security components from logistics technology and can no longer settle for sub-par carriers. The increased usage of transportation technology only ensures contractors meet start-to-finish expectations of their customers while reducing overall freight and project costs. The time to invest in a reliable logistics solution or partner is now — or be left behind your competitors. Don’t ship blind in a rapidly advancing age of lean logistics tools.
Looking towards the bigger picture, three top construction economists are predicting strong growth in the construction industry for 2017, forecasting a 5-7% growth aligned with the same 5-7% growth expected in freight and transportation. Now is the time to budget appropriately, seek innovative tools, and to improve your jobsite efficiency by doing so.