A Perfect Storm: West Coast Port Delays, Driver Shortages & COVID Create Uncertainty, Drive Price Increases
By Tom Chick – Vice President, National Accounts
Technical Transportation, Inc
A perfect storm is brewing in the U.S. supply chain, and its effects will be both far-reaching and costly to businesses.
A combination of negative factors occurring simultaneously has created an unwarranted exposure of high demand and increased logistics costs. This is anticipated to exist through at least the first half of 2021, creating a challenging dilemma for the logistics industry.
In its recent shipments and expenditures index for January, Cass Information Systems said that U.S. shipments increased 8.6% year-over-year, with its expenditures index surging 19.5%.
In addition, a recent Wall Street Journal article quoted DAT Solutions LLC saying that the average cost to hire a big rig from Los Angeles to Dallas in the spot market has risen to $3.16 per mile, excluding fuel, which is “almost triple what it was in April.”
These trends point to the potential for increased transportation costs across the industry at a time when there’s high demand to move goods across the country.
So what’s causing this perfect storm? There are several primary factors at play. Here’s a rundown:
- The West Coast Port Backlogs
Currently, more than 40 ships are sitting anchored off the coast waiting for entry. This is in addition to ships waiting for entry to east coast terminals, such as Savannah, and rail delays out of Canada. This has added a 30-day lead-time to deliveries from California. The delays have been compounded by labor and longshoremen shortages due to COVID-19. - An Ongoing Truck Driver Shortage
Due to an older demographic that currently makes up the driver population, the COVID pandemic has caused many to claim early retirement or furlough time, due to possible health risks in the field. This has been exacerbated by new protocols put in place that cause terminal shut-downs when a driver tests positive for COVID-19. The result is fewer trucks and drivers available to take goods to points across the country. - A Big Increase in E-commerce Sales
With stay-at-home orders put in place for most of last year, the pandemic forced online shopping rates to skyrocket. In fact, overall e-commerce sales grew by 44% in 2020–a nearly triple jump from 2019 online sales. Combined with unseasonably strong online holiday purchases, the market experienced a logjam in delivery times it is still recovering from. - LTL Freight Volume Volatility
LTL carriers have seen a whiplash effect this past year, as they initially were hit with low truckload volumes during the height of COVID-19 shutdowns. However, with the reverse in effect now, carriers are struggling to keep up. This volatility is expected to remain at least through the end of Q1 2021.
What’s the outlook? How should you prepare?
There’s a good chance that rates in general, and LTL rates specifically, will increase during the first half of the year. It’s hard to determine exactly by how much at this moment, but there is a decent probability that will occur for some, if not all, of the industry.
To prepare, we advise all of our customers, and anyone in the supply chain industry, to anticipate a possible 5-15% increase in LTL shipping rates.
It’s our hope that many of the causes behind this perfect storm will be temporary and can be resolved with time and with the COVID-19 vaccines. Some effects will linger, however. Namely the driver shortages.
In the meantime, we here at TechTrans are doing everything in our power to keep operations as normal and cost-efficient as possible for our customers.
We pride ourselves as a one-stop logistics resource for manufacturers and suppliers across North America, and we have developed a strong network of industry partners over the past 30 years who are working with us closely to ensure that delays and costs are minimized.
If you’re a manufacturer needing third-party logistics help as you navigate these uncertain times, we’re here to assist. Contact us today to learn more.
