Coming off an extremely oscillating previous quarter, there were many predictions floating around on how Q2 of 2022 would shake out. Some experts predicted a huge market downturn and trucking bankruptcies galore. Although that hasn’t necessarily been the case, the possibility still looms.
Freight Market Update
Heading into Q3, carriers without dedicated contracts are struggling to find freight. Volumes and tender rejections are trending down and rates have decreased 20-25% since last quarter. Some small carriers have had to close up shop temporarily because they are only breaking even on loads.
The LTL market is also softening into Q3. Volumes and capacity are seemingly balanced right now, thanks to major labor shortages finally resolving. Zipline LTL experts believe current rates should remain consistent, but LTL is never perfect. Shippers should anticipate and prepare for delays regardless.
These are the ripple effects of consumer mindsets shifting, combined with global events.
For many Americans, disposable income is being redirected to travel and entertainment once more rather than home goods. Not only that, but everything under the sun is more expensive to buy than usual. In May 2022, U.S. inflation rates hit 8.6% – the highest since 1981. The price of diesel in the U.S. hit a record high average of $5.718/gallon as of June 13, 2022. It’s sitting at $6.887/gallon on the West Coast.
Russia’s invasion of Ukraine has dealt an additional blow to the global economy—weakening post pandemic recovery and aggravating already-high inflation.
New subvariants of COVID-19 continue to emerge. Some experts are saying these variants have the strongest transmissibility yet and are escaping immunity from past infection and the vaccine. Although major U.S. economic shutdowns seem to be a thing of the past as the virus has become our “new normal,” these variants can take out groups of people on the job at one time and create major supply chain inefficiencies.
Retailers are dealing with insane amounts of overstock right now, as consumer mindsets shift away from purchasing consumer goods. But even in a soft freight market, retailers are still being picky with the brands they choose to work with. In a survey of retail buyers, 90% said a supplier’s ability to deliver on time impacts their purchasing behavior of that brand and 66% have ended relationships with suppliers over delivery issues. Brands who give retailers the most communication, visibility, and transparency will get priority on the shelf.
Q3 Outlook
As of July 2022, Zipline experts predict volumes and rates will continue trending down in most parts of the U.S. until October 2022 when holiday shopping begins.
For the foreseeable future, experts also predict inflation rates and diesel prices will continue to climb. The good news is, the government is stepping in to help as of June 22, 2022. President Biden called on Congress to suspend the federal gas tax for three months to provide direct relief to American consumers. He is also calling on states to take similar action, whether by suspending their own gas taxes or helping consumers in other ways.
Regardless of all this, produce season is in full swing. In the dry van world, hot markets currently include Southern California, Texas, Louisiana, Mississippi, South Carolina, and Georgia. In the reefer market, the Southern border of the U.S. is super-hot as well as the majority of the Southeastern U.S.
Rates picked up a bit at the beginning of the produce season but have otherwise consistently declined. At the end of Q1, the rate per mile was sitting around $3.30 and is now hovering around $2.82 at the end of Q2. Also important to note: contract rates are higher than spot rates in both the dry and reefer markets.
Lean on Logistics Partners to Navigate the Freight Market
Regardless of an always changing freight market, CPG suppliers focused on logistics partnerships rather than freight transactions will be the real winners in 2022. Believe it or not, there are still many aspects of your supply chain that you can control with industry experts on your side.
At Zipline Logistics, we care about each CPG brand’s unique business needs and tailor strategies to reduce overall logistics spend, optimize retail performance, and beat out the competition for shelf space. Zipline processes were built specifically to resolve the most critical logistics challenges faced by consumer goods brands shipping into retail.
We tailor strategies to reduce overall transportation spend, optimize retail performance, and beat out the competition for shelf space. 97% of our orders end up on retailer’s shelves such as Walmart, Costco, Bath & Body Works, Whole Foods, and Best Buy.
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