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Blog / Freight downturn: bad for carriers, but good for shippers?
2 minutes read

Freight downturn: bad for carriers, but good for shippers?

Nintendo Game Boy. Butterfinger BBs. The Ford Thunderbird. The pandemic-era freight boom. Nothing lasts forever.

The shipping industry is seeing too many trucks and too little freight, resulting in a severe freight recession. It’s a problem for the carriers, but their loss could benefit your bottom line. In today’s blog post, we’ll discuss the current freight downturn, its projected lifespan, and how you can use the present conditions to your advantage.

At a time when other carriers were increasing shipping fees and imposing surcharges, USPS pledged to “deliver another successful holiday season of outstanding service” without peak season surcharges.

The news seemed too good to be true. And although USPS will have a surcharge-free holiday season, it has just released its 2024 rate hikes on services similar to UPS and FedEx’s most popular offerings. In today’s blog post, we’ll share the United States Postal Service’s published rate increases, compare similar services by FedEx and UPS, and what this means for you.

How did we get here?

At the height of the pandemic, e-commerce was booming, and so was the trucking industry. Despite a lack of drivers initially, many companies in the freight industry benefitted from pandemic relief, and carriers saw profits soar, leaving very little room for negotiations.

Since then, the e-commerce balloon has slowly deflated as economic conditions worsen. The lack of demand, compounded by inflated hiring during the pandemic boom, high diesel costs, and increased salaries due to union negotiations, has carriers scrambling for revenue.

The downturn has resulted in the closure of several iconic freight brands, including the 99-year-old Yellow Freight company. As the third-largest less-than-truckload brand closed its doors, other companies downsized fleets, initiated layoffs, and filed for bankruptcy.

So, we find ourselves in a quieter-than-usual peak season in the midst of a severe freight recession. To hit earnings goals and avoid layoffs, it’s more important than ever that UPS and FedEx secure clients.

How can you get lower parcel rates during the freight recession?

Freight’s loss can be your gain. Alan Baer, CEO of OL USA, told CNBC, “Without more freight moving, 2024, and potentially 2025, will continue to see soft pricing as capacity outstrips demand.” Others have a more positive outlook. Brian Bourke, global chief commercial officer at SEKO Logistics, told CNBC, “With a lot of uncertainty around consumer demand, interest rates and the global economy, most people do not have a positive outlook on freight volumes in the first half of next year, but we could certainly see a rebound in the second half of next year.”

No matter what the end of 2024 brings, now is an ideal time to negotiate lower parcel rates.

ShipRx combines the latest technology with decades of hands-on experience negotiating contracts for the carriers and, now, for shippers. During the early days of the pandemic, UPS and FedEx could (and did) name their price, and shippers’ negotiation tactics were limited.

In the current freight climate, shippers have the upper hand. If you negotiated your contract more than a year ago or without professional help, now is an ideal time to revisit the terms of your agreement.

When you’re ready to start saving money, ShipRx will review your contract for free. If we see opportunities for savings, we’ll work together to create a negotiation strategy that typically saves clients between 20 – 30% on their annual shipping expenditures.

Most clients complete the negotiation process and begin seeing savings within 8 – 10 weeks. If you want to start 2024 with savings, get in touch with ShipRx today!

 

Jim
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