Shippers may want to think twice before taking advantage of rock bottom rates

As pandemic-fueled volume surges have balanced out over the past few months, the trucking markets have cooled off significantly. As a result, bid rates have all but bottomed out. After two years of surging rates and strained capacity, many shippers are jumping at the chance to save some money. 

SONAR’s Outbound Tender Rejection Index represents the percentage of attempts to book a truck that result in a rejection. As demand outstrips supply, carriers will reject more load requests. As capacity loosens, tender rejections will fall. Currently, OTRI is sitting at 1,554 basis points below year-ago levels, confirming significant market softening. 

Some industry experts, however, are urging shippers to proceed with caution. After all, the only sure thing about the logistics industry is that it changes. 

“We teach our team to pay close attention to market changes and have proactive conversations with our partners,” said Shawn McLeod, President of Axle Logistics. “You can lower your rates for the short-term, but things could do a complete flip by the first of August and then, all of sudden, you could be back with the rates you had six months ago, in turn putting clients in a tough space”

In addition to staying alert to market shifts, McLeod has been having conversations with his customers about relationship building, rate fluctuations, and balancing the need for trucks against the need for service. 

While rates are dropping across the market, Axle has been cautious about taking advantage of those shifts too quickly. Instead of charging into the bid process, many of the 3PL’s customers have accepted a second set of rates with the understanding that these changes may be temporary. 

“Bid rates that we have seen come back from our competition are extremely low and we are hesitant to put our partners in a bad spot by adjusting too early,” McLeod said. “We are keeping honest lines of communication open with our customers that the market may in fact flip which would drive increases from their carriers in the near future.”

Not only does a conservative approach to lowering rates safeguard shippers from a sudden market turn, it also helps protect high-value relationships with existing carriers.

“Our main goal is to build great customer relationships and service them at the highest level,” McLeod said. “The best way to provide that is to build great carrier relationships as well.” 

In order to build those strong relationships, Axle offers incentives to carriers that agree to run with them on a full-time basis. While this often comes with a higher price tag, the improved service levels are typically well worth it for both Axle and its customers.

Shippers are often willing to pay more for these services because they want to see the same faces on their shipments, according to McLeod. They want someone they can trust to haul their loads. At the end of the day, Axle boasts the flexibility needed to help shippers navigate both the spot market and ongoing contracts, regardless of market conditions. 

“We’re different because we are agile in the fact that we have two different models within our organization,” McLeod said. “The company was founded on that cradle-to-grave 360 model. We also provide a traditional siloed approach. We can bring a customer in, take a look at what they need and choose which model will serve their business best. We are essentially two brokerages in one.”