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As we start a new year, what is the outlook for the logistics industry in 2024 and what can companies do to make things better? It’s a question on most people’s minds. Especially, as we remain under a constant barrage of geopolitical, socioeconomic, regulatory, and weather disruptions.
I will try to summarize the expectations for 2024 per mode of transportation as well as some of the key strategies companies should use to manage cost and capacity better.
The first half of 2023 saw continued decline in full-truckload rates due to excess capacity and weak demand, reaching 7-year lows. However, the second half of the year showed signs of recovery with rising tender rejection rates and improving load-to-truck ratios, leading to a rate stabilization. Less-than-truckload rates on the other hand remained relatively stable in 2023, with some regional and segment-specific variations. Some carriers implemented small rate increases, while others offered discounts or negotiated contracts with certain shippers.
A shift in the FTL market is likely coming in 2024. Several factors suggest potential rate increases due to decreased capacity and increased demand linked to projections for economic growth and continued e-commerce boom, which could lead to higher freight volumes. This will further intensify demand for limited capacity. Other elements influencing FTL rates are rising costs associated with higher diesel fuel prices, labor costs, and insurance premiums. Many FTL contracts negotiated during the downturn in 2023 are up for renewal in 2024. New contracts are likely to reflect the changing market conditions and higher cost environment. LTL rates are expected to remain relatively stable in 2024, with potential for modest increases – or even slight – decreases depending on specific segments and market conditions.
Here are some of the key strategies around FTL and LTL in 2024.
Build strong relationships and foster partnerships with reliable carriers and brokers who understand your needs and can offer flexible solutions and competitive rates.
Leverage technology such as freight procurement platforms, dynamic TMSes, visibility platforms and freight spend management solutions.
Explore green logistics options like fuel-efficient vehicles, optimized routes, and carbon-neutral transport providers to not only reduce costs but also enhance your brand image.
Continuously monitor market trends, fuel prices, and regulatory changes.
Be prepared to adapt your strategies and explore alternative solutions to optimize costs and maintain your competitive edge.
On the parcel side, we have seen rates increase for the last several years. FedEx and UPS implemented a substantial general rate increase of 5.9% in January 2024, impacting most services. Similar increases are expected from U.S. Postal Service later in the year. These general rate increases reflect continued rising costs for labor, fuel, and technology, pushing carriers to recoup expenses by raising rates.
There are some factors that can positively influence parcel rates in 2024.
Continued e-commerce boom puts pressure on parcel networks, potentially creating competition for available capacity and influencing pricing. A potential economic slowdown could decrease shipping volumes, putting downward pressure on rates in the long run.
Overall, U.S. parcel rates in 2024 are likely to increase in the near term due to the impact of general rate increases, particularly for residential deliveries. In the long term, they are expected to face downward pressure. A potential economic slowdown and increased competition could moderate rate increases later in the year.
Businesses concerned about rising parcel costs should leverage technology like freight-spend-management solutions and multicarrier parcel optimization solutions to compare rates, optimize routes, and automate processes. Shippers should use insights obtained from these platforms to better negotiate contracts, seeking volume discounts or negotiate specific terms with preferred carriers. And finally, explore additional or alternative carriers. Consider smaller regional carriers or alternative shipping methods for specific needs.
Cost management remains a top priority for both shippers and logistics providers. Reducing overall logistics costs in 2024 requires strategic thinking and proactive measures across all transportation modes powered using modern, AI-powered technology platforms.
Look for more articles from me every week on FreightWaves.com.
About the author
Bart De Muynck is an industry thought leader with over 30 years of supply chain and logistics experience. He has worked for major international companies, including EY, GE Capital, Penske Logistics and PepsiCo, as well as several tech companies. He also spent eight years as a vice president of research at Gartner and, most recently, served as chief industry officer at project44. He is a member of the Forbes Technology Council and CSCMP’s Executive Inner Circle.
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