As freight conditions continue to deteriorate, along with tariffs imposed on a variety of goods and a prolonged U.S.-China trade war, some less-than-truckload (LTL) carriers are closely examining their operational budget to remain competitive.
And it doesn’t look like freight volumes will rebound anytime soon, said Tim Denoyer, vice president and senior analyst for ACT Research.
“Freight remains soft, as expected, and while we see reasons for recovery in the second half of 2019, escalating trade tensions raise the risk of freight recession,” Denoyer said.
U.S., China talking again
Tariffs and the threat of more being imposed on imported and exported goods were discussed at the G-20 Summit in Japan last week. President Donald Trump and Chinese leader Xi Jinping reached agreement on restarting trade talks at the Summit in Japan, but it is not the end of the concern. Despite agreeing to return to the negotiating table on tariffs, no timetable was set for completion of talks. The countries did agree to an easing of restrictions against Chinese tech company Huawei and increased U.S. farm product exports to China.
Furthermore, new tariff concerns were raised when Trump suggested the U.S. could go after Vietnamese goods, claiming in part that some products are being relabeled “Made in Vietnam” to avoid tariffs.
During these uncertain economic times, an increasing number of carriers – as well as 3PLs – are turning to companies that specialize in business process outsourcing (BPO) as a life raft. Chad Crotty of DDC FPO in Evergreen, Colorado, is witnessing this first-hand.
“Tariffs not only raise the cost of products in the U.S., but also impact the entire supply chain,” said Crotty.
Outsourcing for flexibility
Estes Express Lines, a long-time partner of DDC which has approximately 8,500 LTL drivers, said outsourcing back office processes helps it remain competitive as customer requirements become more complex and constantly change.
Mike Campese, vice president of customer integration of Estes in Richmond, Virginia, said he recently had a conversation involving a local company that was heavily impacted by tariffs.
“That company hired very rapidly earlier in the year and now they are going through a big reduction in workforce,” Campese said. “The ability to use a business process outsourcer allows companies to scale up or scale down with less disruption to the business and the workforce – this is huge in our industry.”
“In the less-than-truckload business, customer expectations and requirements have gotten more complex every year,” Campese said. “We are a big trucking company and have a high volume of shipments on a daily basis. The processing of those transactions has to happen fast and be turned around very quickly.”
FreightWaves’ Outbound Tender Volume Index in SONAR shows that the amount of contracted freight in the U.S. in June dropped nearly 6 percent from a year ago.
Attention to detail
Less freight volume, which can be attributed in part to tariffs (real or threatened), means trucking companies must ensure no mistakes are made regarding tariff codes on imported and exported goods.
Luna Boyd, vice president of client solutions for DDC, works with carrier and 3PL partners to ensure data accuracy – this includes verifying that tariff codes are entered properly for each shipment.
“It’s a very critical process because if the wrong tariff code is entered, it could cost them a large amount of money,” she said. “We can help them avoid those penalties.”
It appears that tariffs and tariff threats will remain part of the negotiating strategy for the U.S. for the foreseeable future, whether it is China, Mexico, Vietnam or another locale, leaving in place a continuing level of uncertainty and complexity for supply chain businesses. Getting necessary assistance in navigating this new landscape has never been more important.
To learn more about DDC’s authority in freight business processes and how the company safeguards 25% of the top transportation companies as ranked by revenue, visit their site here.