SPC Asks the Experts: What’s the Current State of the Logistics & Shipping Industry

We reached out to longtime SPC partner ALG Worldwide Logistics to answer a few questions about the state of the logistics and shipping industry.

At a high level, what’s the state of the shipping industry compared to January and what are the keys to moving toward any sense of normalcy?

According to several sources we monitor, the supply chain from January through March continued to grow. April has shown a slowdown partly due to transportation capacity with metrics declining to their lowest level since January 2021. Because of this minor slowdown in demand, the trucking market is showing improvement specifically in regard to capacity and tender rejections. However, freight rates, both contracted and spot rates, remain high.

According to the last survey, we are still short about 80,000 truck drivers. Recent inflation numbers add to the pain. Since 2019, there has been a 30% increase in the cost to operate a truck. It is still unclear when this situation will change. In addition, fuel prices remain extremely high, exceeding $5.50 per gallon of diesel as compared to $2.68 per gallon in January 2021.  Diesel fuel remains volatile and supply is limited. It is surely a variable cost to take into consideration.

A return to normalcy? We must apologize, we wish we had a definitive answer and, in all transparency, we just don’t.

How are mail deliveries affected? Is mail still relying on rail lines to keep up? 

Mail deliveries are moving in the right direction. On-time deliveries have been improving. As part of the multi-modal transportation strategy we use to move mail, we do not “rely” on rail lines to keep up, rather rail lines offer a very competitive option in certain parts of the country against the OTR rates. “Over the road” (OTR) is what a trucking company charges for their services, usually rates are dollars per mile. Rail is not an overflow strategy but an economic strategy within the mail logistics supply chain. Reach out and consult with SPC on the best delivery methods for your direct mail programs.

What’s the current status of LTL? Last year, LTL became super unreliable. What’s the outlook for Q3/Q4?

LTL is less-than-truckload shipping, also known as less than load. It is the shipping of freight that is sized between individual parcels and full truckloads. This usually equates to 10,000 lbs and less than 7 pallets. If exceeded you are charged for a full truckload. LTL typically has 3 service levels. Standard, delivery was 4-5 days pre-pandemic, expedited was 2-3 days and now that is stretched to 2-4 days. LTL remains a viable service, but it can be undependable in meeting service standards on a regular basis. Of course, this is our opinion under current conditions. Specific to LTL, capacity remains high and until this diminishes, we do not see any changes going into Q3/Q4. As far as delivery, full truckload delivery may be a little faster than standard LTL.

What’s the guidance to plan for forecasted changes to freight rates?

Spot market rates are truck rates that are quoted at the time of service instead of having “contracted” rates. In a strong spot market, when the rate is consistently higher than normal, it’s difficult to keep carriers on contracted rates. We will try to continuously grow that part of our business. With that, there are no guarantees the freight rates will go down. Continued economic pressure, inflation, increased consumer spending and growing wages may lead to continued labor and capacity issues yielding higher rates. Lockdowns in China have allowed ports to “catch up” and that might lead to another round of port and transportation/supply chain congestion as inventories get replenished and importers catch up.

What is the typical mail consolidation transit time to various parts of the United States?

ALG updates a standard transit map on a regular basis for drop ship out of our Romeoville, IL facility (see below).  The transit map includes what we call “in facility” time or time to process through drop at NDC/SCF facilities. We have been very successful with meeting the transit times over the past two years through the pandemic and look to continue this. As mentioned, this is ALG’s standard transit map. “We do run into various issues in certain parts of the country at times, but it’s not predictable and we do our best to work around or solve the issues as quickly as possible!”

ALG Worldwide Logistics
If you have additional questions about the logistics & shipping industry, contact your SPC Sales Rep.

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