Capacity continues to be strained across the entire North American supply chain because of several factors, including direct and indirect effects of COVID-19, extreme weather and waiting steamship lines off the West Coast. To expand on these further –
Direct and Indirect COVID-19 Impacts
Less-Than-Truckload (LTL) carriers have been dealing with the impacts of COVID-19 for nearly 12 full months. The LTL workforce, which consists of drivers, dock employees, and administrative and corporate staffing, has had to navigate changes and costs associated with day-to-day operations at each terminal. In addition to the price of Personal Protective Equipment (PPE), which has been reported to total over $1M per month for some carriers, COVID-related expenses include the cost of terminal closures, properly cleaning facilities and equipment, and the shortfall of employees to manage the daily workload. LTL networks are further strained because the economy remains strong. In the last six to nine months, carriers have seen more freight month-over-month, year-over-year.
Over the last year, LTL carriers have been able to adjust operating procedures and are able to work more efficiently now than they were at the beginning of the COVID-19 pandemic. For example, many have started providing dedicated equipment to employees, rather than slip seating (shared equipment). This increases safety and reduces the cost and time spent per day cleaning equipment.
Extreme weather events such as flooding, hurricanes, blizzards, etc. often produce immediate volatility. In addition to the obvious short-term impacts – which may include shutting down local or regional supply chains, closing businesses and government offices and blocked roads – intense or longer-lasting weather can also cause long-term effects on supply and demand, and therefore significantly impact freight rates. Last week’s extreme cold weather (February 14, 2021) had a large impact on the supply chain, with 46 states under winter weather alerts and warnings. While winter certainly brings its own regular challenges, this widespread impact effecting multiple areas of the country will continue to slow freight traffic significantly. The upcoming challenges will include digging out the freight that hasn’t moved, in addition to managing new freight shipments that are expected.
Steamship Offloading Delays
Issues on the West Coast are also impacting the supply chain. In January, Southern California reported 30 steamship lines waiting to be offloaded. Each vessel can contain upwards of 300,000 twenty-foot containers filled with goods. Throughout the month, there was hope that these lines would continue to decrease. Unfortunately, February brought higher numbers, increasing the number of lines to 38 by the first of the month. Factors that impact the ability to offload these vessels quickly include choppy waters, COVID-19 restrictions and infections, and the sheer size of each vessel and quantity of containers to offload.
Second and Third Quarter Predictions
As we approach the second quarter, some positive things to consider include the COVID-19 vaccination rollout and improved weather. According to some news sources, it looks like the vaccine is expected to become more widely available faster than originally planned – with a larger number of Americans potentially having access as early as April or May. We are hopeful that the industry will continue to overcome current challenges in Q2 and that the third quarter will more closely reflect typical circumstances, including a normal retail surge in transportation that will impact volume more predictably.
How Can Shippers Help?
While the transportation system struggles to keep up with the demand for tighter delivery dates (as expected a year ago), offering increased flexibility in delivery ranges may be an option. Additionally, with embargo notices and maximum ship volumes being reported by small package and LTL providers, consolidating orders into larger shipments on dedicated trucks when appropriate can also help.
While we are hopeful for better supply chain conditions in the next six months, let Ryan Transportation help you optimize your supply chain and overcome the shipping and transportation challenges of the last year.