Our advice to shippers is to get ready for a fight when 2014 rates are announced. Now is the time to start mitigating the hikes we expect to see across general rates, surcharges and accessorials.
Atlanta, Georgia (PRWEB) August 26, 2013
NPI, a leading spend management consulting firm, advises shippers to prepare for higher shipping costs in the second half of 2013 and into 2014. With carriers lowering earnings forecasts, as well as the arrival of stricter labor regulations, NPI estimates that carriers will turn to higher rates and surcharges to make short- and long-term profitability gains.
In March of this year, FedEx lowered its annual forecast citing several reasons including customers’ increasing preference for less costly, slower delivery options over more profitable, expedited shipping services. In July, UPS also lowered its forecast for 2013 citing similar reasons. With UPS and FedEx under pressure to improve financial performance, historical pricing behavior indicates these carriers will turn to high general rate and surcharge increases when rates for 2014 are announced in the fourth quarter of this year.
“Lower demand for expedited services combined with higher labor costs have dealt a one-two punch to carriers. Our advice to shippers is to get ready for a fight when 2014 rates are announced. Now is the time to start mitigating the hikes we expect to see across general rates, surcharges and accessorials,” said Jon Winsett, CEO of NPI.
Additional market forces that will shape second-half 2013 and 2014 shipping spend include:
-- A capacity crunch. Carrier capacity, especially for small parcel carriers, is tightening alongside an uptick in manufacturing and consumer confidence. Capacity will continue to tighten as manufacturers, suppliers and retailers gear up for the 2013 holiday season, thereby giving carriers the leverage to raise rates.
-- Higher labor costs. Effective July 1, changes to the U.S. hours-of-service rules for truck drivers have reduced weekly driving time for some truckers, including long-haul tractor-trailer operators. These changes are expected to increase carriers’ labor costs, make it more difficult to hire and retain drivers, and slow down the delivery of goods across the supply chain. Carriers will be highly motivated to pass on resulting higher operating costs to customers.
-- Scoping down of service levels. General rate hikes, higher accessorial fees and new surcharges are not the only way carriers will increase profits in the year ahead. Currently, carriers are scoping down contractually-obligated service levels – for example, removing Guaranteed Service Refunds. By doing this, carriers can reduce the cost and resource burden of fulfilling certain contract terms.
NPI is a spend management consulting firm that protects companies from overspending in specific cost categories – information technology, telecommunication and transportation. Using a combination of market experts, proprietary methodologies and extensive data, NPI ensures that prices and terms are best-in-class. Reviewing more than 14,000 purchases annually, NPI provides objective oversight for billions of dollars of strategic spend for its clients. To learn more about how NPI can help your company start saving today, visit http://www.npifinancial.com or call 404-591-7500.