LM Viewpoint on the 2023 Rate Outlook: Will shippers catch a break?

My favorite Logistics Management (LM) tradition is our Annual Rate Outlook cover story that becomes a live webcast (Jan. 26)—the ultimate one-two punch for shippers looking to gain clarity on costs in the year ahead.

In fact, this marks the 18th year that we’ve produced this print/web event, and our analytics show that this approach continues to yield our most-read magazine feature and our best-attended webcast of the year.

We lead off the January issue with a snapshot of the state of the global economy and fuel costs and then examine how those realities will affect freight rates and capacity levels across each mode of transportation over the coming year. The effort gives shippers a clear, 30,000-foot view of where freight costs are heading and why.

This year, contributing editor and long-time supply chain consultant Brooks Bentz has stepped in to conduct this annual project. Over the course of the past two months, Bentz spent time with some of the leading freight transportation and fuel analysts in the domestic and global markets. The result of these conversations unfolds on page 20.

So, what did Bentz find? “The quick answer is that rates aren’t likely to increase much across just about every mode,” says Bentz. “So, shippers may catch a break this year, but that’s just scratching the surface. Let’s hope that 2023 sees the end of some fairly desperate and chaotic situations that drove the cost of supply chain up and the reliability down,” says Bentz.

According to Bentz, the last couple of years should have opened the eyes of savvy organizations to the need for new ways of looking at the bigger supply chain picture. He believes that, overall, we need to create an approach, methodology and new tools to help optimize supply chain performance—not just the parochial individual components of it. “There’s simply too much in the way of latent cost and reliability factors that need to be identified and dealt with,” he says.

And while its certainly advantageous to examine the future of rates and understand what’s driving movement, Bentz believes that it might be time for a better way of rate-making between carriers and shippers, and suggests that fresh approaches are in the works.

“Today we essentially have either contract rates, typically with large shippers or market spot rates with smaller players through brokers and other third-party service providers,” says Bentz. “This should not be the final answer, as there’s too much volatility in this model, which leads to service reliability problems and budget issues. A potential new ‘in-between’ approach is something we’re going to explore in LM in early 2023.”

Bentz will get no argument from veteran freight transportation reporter John Schulz that the last couple of years have been the jump-start the industry needed to usher in new ways of doing business. According to Schulz, the period of time has forced the hand of many reluctant operations to finally grasp the importance of technology, especially in the freight payment sector.

“Disruption has put supply chain on the table in the C-suite, and not always in a good way,” says Schulz. “But clearly it has moved up the corporate ladder, and now everyone wants real-time freight data to drive efficiencies throughout their organization. It’s clearly a whole new ballgame in logistics, with millions of dollars in supply chain savings to be realized with the right tools in place.”