Supply Chain Impact

WHAT WE’RE SEEING

LOGISTICS MARKET State of the Market

As 2021 enters its final months, the transportation industry will see capacity remain tight, which will impact cost constraints and cost increases. Meeting demand will continue to be a challenge through Q3. Planning and communication with logistics carriers will be key moving into Q4. Small Package Outlook Parcel carriers’ recent investments in capacity will not be enough for peak season this year. During the 2021 holiday shopping season, delivery demand is expected to exceed capacity by 5 million pieces a day. Less Than Truckload (LTL) Freight Outlook Frequently, truckload capacity will correlate with the LTL market. When truckload capacity is tight, shippers will utilize LTL more frequently, particularly on larger shipments. Larger truckload shipments will likely be divided into two LTL shipments, which further congests LTL carriers. Due to LTL carriers currently being at or above capacity, many have embargoed certain areas, with some setting lower limits to weights or lineal feet they will pick up. The lack of supply, and no end in sight to the increasing demand has an obvious impact on pricing. LTL rates continue to rise faster than normal. National carrier rates are rising quickly and are at higher levels than regional carrier rates, as national carriers rely on longer line hauls and purchased transportation. Finally, these market conditions are impacting service levels. Shorter haul lanes tend to be faring better than longer haul lanes, where bottlenecks are more likely to delay shipments. Most carriers have suspended refunds on their guaranteed products, as they simply have too many As truckload volumes continued to climb through Q3, the industry faced several challenges including port congestion, a significant rise in inflation costs, and demand spikes. Retailers across the country are beginning to raise prices to offset shortages and shipping costs. Due to the added demand for volume, expect to see increasing rates through the end of the year. The truckload market continues to struggle with capacity and one of the many reasons is driver shortages. To help combat driver shortages, many trucking companies offer huge wage increases to attract drivers to the industry. However, other competitive job markets such as construction and warehousing are also struggling to fill positions. In addition, the e-commerce boom created an uptick in driver demand as several hundred thousand courier driver positions were filled, reducing the amount of CDL (Commercial Driver’s License) candidates. Fuel Prices Fuel increases have slowed during the second quarter, but steady increases are expected on fuel surcharges through the remainder of 2021. Hurricane Ida caused some disruption with oil production in the Gulf of Mexico and affected refineries in the Gulf region. This, along with high demand, has caused fuel pricing to rise in the past few weeks. shipments delivering after the standard service days. Full Truckload (TL) Freight Capacity Constraints

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