The shipping industry continues to feel the impact of an ongoing freight recession that started in 2022 and that is expected to continue until at least the second half of 2024. In fact, in our State of the Shipping Industry Report 2024, we named it the top trend we are watching.
In this guide, we look at the reasons for the freight recession, the challenges you will continue to face and the opportunities you can take advantage of. Most importantly, we provide you with tips on how to navigate it moving forward.
5 Ways To Navigate the Freight Recession
The freight recession is largely due to slower consumer spending after the COVID-19 pandemic ended. Because of this, freight carriers began to slash rates in 2023 to attract shippers, while freight brokers started doing whatever they could to make up for reduced compensation. Additionally, thousands of carriers who didn't diversify their services started laying off employees last year or closing their doors altogether.
While this certainly remains a concern for everyone in the industry, freight shippers have been breathing a little more easily. What was a carrier market for years with high demand and tight cargo capacity has turned into a shipper's market, giving companies more options at rates that are easier on their budget.
Some analysts are forecasting that the economy will slightly improve by the second half of 2024. But before the tables turn and the rates increase, shippers can use tips from this guide and make the most of a difficult shipping situation.
1. High supply, low demand
Like we have said, freight shipping has not rebounded and is not expected to do so until the second half of the year. That means slow consumer spending, potentially erratic fuel prices and unsteady global markets all continue to take their toll on the freight shipping industry for both carriers and shippers. In fact, the demand for shipping still has not bounced back to pandemic levels and the supply of cargo space remains high in 2024. That simply means struggling freight carriers are more willing to negotiate shipping rates to keep current shippers loyal and gain more business.
What you can do
While landing fewer purchases may be an "ouch" for your business, a slow economy can work in favor for you as a shipper. You'll benefit from lower spot rates for less-than-truckload (LTL) shipments and can negotiate better contract pricing for full truckload. You can turn those savings into an advantage for both you and your customers. If your carrier is no longer in business, has sold portions of its fleet or you're unhappy with their services, take these steps to find a new carrier:
- Work with a third-party logistics (3PL) company that has a network of national, regional and local carriers willing to negotiate rates.
- Compare rates from multiple carriers. Some may be willing to negotiate better pricing if they know they're up against competition.
- Research freight service options among various carriers to ensure they add value to your shipping.
2. Diverse shipping modes
Trucking companies aren't the only freight carriers that have been feeling the pinch since the recession started. There has been an abundance of empty cargo space for ocean freight, rail and air carriers, too. To save money, some carriers started reducing the number of loads they have accepted, while others went out of business. The ones still in business have dropped their rates in response to decreasing freight shipping movement.
What you can do
Decreased pricing can make shippers more open to using different shipping modes — or mix and match their options. If freight carriers are reducing their fleets or shuttering altogether, you can turn to air, ocean or rail as an alternative. In particular, since air freight prices have dropped, you could use it to your advantage and offer faster shipping at a lower cost to attract new customers and reward current ones. Using multiple modes, either separately or in a multimodal or intermodal capacity, can be a logistics challenge. However, 3PL experts can help you navigate the various methods of transporting your freight shipping to its destination.
3. Carrier of choice status
In previous years, when cargo capacity was in high demand, shippers needing space for their freight had to earn "shipper of choice" status with their carriers. Tables have turned, and with cargo space still in low demand due to the recession, shippers now have the advantage. "Shipper of choice" has turned into "carrier of choice." Shippers can set higher expectations for their carriers making them more willing to negotiate rates and offer more service options to keep and gain new business.
What you can do
Since carriers have been vying for loads since the beginning of the freight trucking recession, you have more opportunities to make service demands. Keep in mind that additional services will still come at a cost. But in a shippers' market, freight carriers may be more willing to negotiate — especially with 3PL companies who can bring them steady business from their shipping clients. Consider the following:
- Delivery times. Faster shipping can attract more customers to your business. Talk to your carrier if you need to adjust your delivery times. If they can't help you, work with a 3PL company to find carriers that will.
- White glove services. Use this time to give your customers premium service, such as inside delivery, unpacking/assembly, added security and insurance for precious commodities.
- Real-time tracking. Review your carrier's shipment tracking capabilities. Knowing when shipments will arrive can help with inventory control and fulfillment services. Your customers will appreciate getting timely notifications, too.
- Accessorial fees. Carriers may increase their accessorial fees to compensate for lower rates. Your 3PL consultant can identify those costs and help you negotiate with the carriers.
4. Increase in the cost of fuel prices
Fuel prices are constantly fluctuating and can erratically affect your shipping costs. In fact, the price of diesel fluctuates every day — hourly even. Since the freight recession started, fuel prices have historically been elevated but as of January 2024 showed promising rebounds. Regardless, there's no way to anticipate if the cost of diesel will go up or down. And with the unpredictability that we have seen since the freight recession began, shippers should look for ways to account for potential increases.
What you can do
Now would be a good time to evaluate your shipping strategy. Here's a start:
- Review your shipping lanes to determine if more direct routes can be taken.
- When poor weather conditions or construction are prevalent, calculate if shipping around those areas can ultimately save time and fuel.
- Time your shipments to minimize or avoid empty legs on return trips.
- Store your products in warehouses more proximate to your customers.
Your 3PL expert can work through these scenarios with you to find the best options.
5. Customer service expectations
Shippers work with freight brokers and 3PLs to access more carriers at discounted rates. During a freight recession, carriers with excess cargo space may lower their rates. To make up for the difference on their end, some freight brokers may reduce the quality of service they offer.
What you can do
Meet with your broker to ensure that while carrier rates may be lower than pandemic levels the customer service your 3PL provides remains the same. If you find their services aren't top notch (regardless of price), it may be a good time to research opportunities with other partnerships.
Need assistance navigating the freight recession? GlobalTranz can help!
GlobalTranz has decades of experience in the logistics industry and helps thousands of shippers of all sizes move products with great efficiency. We are also part of WWEX Group, alongside Worldwide Express and Unishippers. Combined, these three companies make up one of the largest and most diverse 3PLs in the industry, providing shippers with top solutions and financial stability that helps them succeed. Through our full suite of shipping solutions, we service more than 48 million shipments annually, and have the resources and expertise to work with companies of all sizes in nearly every industry.
See how GlobalTranz can help you transform your freight shipping. If you are ready to talk to an expert, reach out for a free consultation today!