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Hours Not Miles: A New Normal

Rates continue to cool as we begin the second quarter of 2019, and detention times are coming back into focus for many carriers. We believe, in this relatively new landscape of electronic logging devices, logistics professionals will need to shift their focus to hours instead of miles.  We touched on this back in 2018, but the importance of changing that perception accelerates as negotiating power shifts from carriers back to shippers and 3PLs.   

In a regulatory landscape focused on the hours a driver is actively on the job (whether he is cruising at 65 mph, idling in traffic in a busy metro area, or sitting at a shipper waiting to be loaded), shippers must improve loading efficiencies in their own operations to maintain good relations with carrier partners, even in this rate and capacity environment where the power in negotiations lies squarely with shippers.

 

Gone are the heady days of mid-2018 with accelerating shipping volumes, constrained capacity, and skyrocketing rates in which shippers were scrambling to become shippers of choice to obtain and retain good capacity. Today we find ourselves in uncharted territory, with carriers rejecting a mere 5% (OTRI.USA) of loads tendered, in comparison to June of 2018 when tender rejections reached a whopping 27% with carriers setting aside lower contract rates to jump into the spot market where rates were at historical highs.

This matches what we see on the ground in our own operations, as well as, what we hear anecdotally from other brokers and carriers. The volatility that broadly pushed pricing lower means carriers are holding firm to more favorable rates negotiated with shippers in the previous rate environment instead of jumping into a bearish spot market. The market dynamic has undoubtedly flipped, and we see lagging detention times as a symptom of this shift.

 

The release of the WAIT index on the FreightWaves SONAR platform, detailing the average wait time in minutes in each of the 135 market areas making up the continental United States, allows us to take a peek behind the curtain and examine average detention times at a market level. The recent release of March numbers provides us with a good opportunity to dive into the indices to see where shippers excel and where they underperform.

National detention time averages have jumped 7.7% (WAIT.USA) from the end of May 2018 to the most recent data released at the beginning of April, confirming what we’re hearing on the ground from carriers as shippers previous attention to reducing detention times falters.

 

As we can see on the maps below, the longest wait times in the United States are currently found in the Erie, PA market, where carriers wait an average of 321 minutes to be loaded. These long wait times are followed by the Fresno, CA (285 minutes) and Rochester, NY (233 minutes). Interestingly, the Fresno and Rochester markets fell by 42 and 53 minutes respectively over the course of the last month.  The shortest wait times exist in the Green River WY, Columbus OH, and Albuquerque NM, markets, at 62, 87, and 99 minutes respectively.

Underlying data derived from the FreightWaves SONAR platform.

 

The largest shift up in wait times in the Cedar Rapids, IA, market, which saw a staggering jump of almost 39% in the last month, while the largest reduction in average wait time occurred in the Green River market, cementing its place as last month’s market with the shortest overall wait time at just 62 minutes.

Underlying data derived from the FreightWaves SONAR platform.

 

Obviously, an average wait time of almost five and a half hours is unacceptable by any reasonable measure, but often happens when shippers regain negotiating power. Advanced technology, transparency, and the resulting changes in HOS rules will force shippers and carriers to reckon with and adapt to a new normal. We believe the continued back and forth is short sighted and could be mediated if both sides worked to create strong partnerships based on a mutual commitment to creating efficiencies that would benefit everyone. More importantly, these relationships would foster an environment impervious to the rate shifts in an ever-changing market.

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