Freight demand has been lower than expected. We demanded to know why.
Freight demand was lower than expected in late September and early October. Traditionally, this has been a peak shipping point in the season due to retailers stocking up merchandise to accommodate for holiday shopping. However, this peak has been less prevalent in recent years, and especially appears to be down in 2012. We used our industry knowledge and insights to uncover two fundamental reasons why:
1. Shift in inventory models
It’s difficult to prove this concretely, but there are those who theorize that many firms decided to shift further away from traditional inventory models (where retailers stock up their shelves during strong economies) and move closer to the concept of a Just-In-Time inventory model.
The Just-In-Time inventory model has merchandisers minimally stocking their shelves during September/October and only ordering more product when needed. This way, they avoid over spending up front and not having the sales to match the large cost of their inventory. The prior thinking was to fully stock your shelves in September/October and bank on a strong holiday season.
2. Slow or stagnant economy
Even with the shift in inventory models, 2012 demand seems to be well below average for this time of year. This could be an indicator that growth for the 3rd and 4th quarter may be slower than originally predicted – most industry forecasters called for gross domestic product (GDP) to grow between 2-3% over this period. A slow economy and an underperforming GDP are a good recipe for reduced freight demand.
What does this mean for shippers?
Regardless of why demand is down, or what this indicates, the fact remains that there is less freight moving in the market. This translates, at a macro level, to generally lower pricing and more available capacity. As of right now we are anticipating the softer demand will last through the remainder of 2012 and into early 2013. The next significant demand surge will likely occur in February/March of 2013, but a lot could change between now and then. We believe shippers would be wise to take advantage of this lull in freight demand and the potential pricing benefits it brings.
Find out if rates have lowered in the lanes you ship in by visiting www.freightquote.com.
We’re currently seeking applicants for the following positions at our company headquarters in Lenexa, KS:
To learn more about one of these exciting positions, check out our Careers page at http://www.freightquote.com/about/careers/
In the hit movie Moneyball, Oakland A’s general manager Billy Beane, played by Brad Pitt, is portrayed as one of the best general managers in baseball because he successfully replaced marquee baseball stars with unheralded players who had reputations for working hard and getting the job done.
When Billy Beane’s Oakland A’s recently needed a rush supply of baseball bats they turned to Old Hickory Bat Company to come through in a pinch. Old Hickory Bats, who is a major supplier of baseball bats to organized baseball teams, went through the Freightquote online booking process and selected Roadrunner Transportation to handle this important shipment.
The A’s, who happened to be in the middle of a heated pennant race, needed the bats delivered the Tuesday after Labor Day as they faced the Los Angeles Angels that night. The problem was the bats were not scheduled to be available for delivery until late Tuesday. In a panic, the A’s contacted the Freightquote LTL logistics team who worked directly with Roadrunner Transportation to figure out a solution. Roadrunner terminal employee, Tom Kelly, ended up putting a load of bats in a rental truck and, with the help of another terminal employee, made the delivery to the Oakland A’s in time for Tuesday afternoon batting practice. “We simply needed to make it happen!” said Kelly when asked about the success of the timely shipment.
People say baseball is the ultimate team sport and Freightquote, Old Hickory Bats and Roadrunner definitely worked together like champions to help out the A’s. At Freightquote we call that true moneyball.
Freightquote executives and employees from many different departments along with their family members came out this past Saturday to support Habitat for Humanity. Together, they braved the cold, worked hard, had fun and, most importantly, helped on a house for a Kansas City, Kansas family in need.
Habitat for Humanity is a non-profit organization that works in partnership with people everywhere, from all walks of life, to eliminate substandard housing by building simple, decent, affordable homes to sell to low-income families in need. Habitat’s philosophy is: “Encourage a hand-up – not a hand out!”
Byron Clymer, CIO, said,
“Habitat for Humanity is a great program for our community, and over the years I have participated in a number of projects around the KC metro area. I enjoy volunteering my time to Habitat because you immediately see the results of your work. The families receiving the house really appreciate the help of all of the volunteers, and it gives them a home and a place to make memories.”
“I have to tell you this weekend was great! Being relatively new to Freightquote, I got to meet new people, as we had volunteers from a lot of different departments. We accomplished a lot and made more progress than Habitat thought we would . . . but that is how the folks at Freightquote roll!”
Freight Classification can be a tricky thing. There are thousands of item numbers to choose from and once you find one that looks right, you have to determine if there are packaging requirements, density requirements or some other hidden note that you didn’t spot. In total, there are 18 classes to choose from ranging from 50 (lowest) to 500 (highest).
Let us break it down for you. The NMFC (National Motor Freight Classification) classifications provide a standard way to analyze commodities. The class assigned to each product is based on four factors common in transportation: density, stowability, handling and liability. Evaluating products in the marketplace and assigning classifications to them makes it easier for shippers and carriers to negotiate rates.
Classification aims to separate distinct items like hardwood flooring (class 50) from hairdryers (class 100), while at the same time combining items with the same general characteristics, like shoes (class 150), for example, into one classification. This makes communication about the product much easier for both shippers and carriers. So instead of having to worry about what kind of shoes, what brand name or size you are shipping you just look for shoes. Easy, right?
Enough with other examples, you just need help finding the right class for your product! Not a problem – there are a variety of resources available to you. You could always start by calling us and we can assist you. If you’re the do-it-yourself type, you can check out the product list at NMFTA.org where you can buy a book or a subscription to their online product called ClassIT. Or, if you only have a few items, you can pay a small one-time fee and the National Motor Freight Transportation Association (NMFTA) will tell you the proper NMFC to use.
If you’re going to venture out on your own and try to find the right freight class for your product here are 3 helpful tips:
- Use density as a starting point. Learn to calculate freight density to determine your classification range. You can find more
info here: Freight Density.
- Read the notes. Many items have notes that explain the specifics requirements for that class.
- There is only one correct item number for your product. If you get stuck, ask for help.
That’s enough about freight classification for now. More to come later so keep checking in with us. Happy shipping!