Ryan: Hello and welcome to the October Robinson Roundup, our monthly review of transportation related issues impacting shippers. My name is Ryan Hammett and as always, my colleague, Mat Leo joins me.

Mat, we're going to talk about bid season and some section 301 tariff updates, but there's plenty to talk about now that we're on the other side of the East and Gulf coast port strike and all the severe weather that we've had, it's really had quite the impact on shipping. So, let's get started there.

Mat: Yeah. So now that we're on the other side of those uncertainties, you know, the will the strike goes on and how long will it last if it does happen? And, what's the extent of damage from hurricanes Helene and Milton? We're moving to a place where we can start to draw some conclusions.

And, you know, now as we take a breath, the USMX and ILA have reached an agreement until January 15th, but there is a large section of the United States in the Southeast that's still struggling to recover from these back-to-back hurricanes. There's widespread power outages and flooding across Florida that have hindered the ability of businesses really to return back to standard normal shipping patterns and the freight backlogs that have come up from the combination of those three-day port closures as well as the business closures from storms and closed LTL terminals, et cetera.

Well, it's going to take some time to work through. I'd say probably between now and early November. The combined effects of these backlogs from the storms and the port closures just going to create added complexity in the freight markets across that southeast region.

We can expect loaded truck ratios to experience tightness on really both coasts as containers continue to flow through the west coast and cargo begins to move across the reopened ports in the southeast, well in the east in general. And road closures including some of those critical interstates within the southeast have been closed from the hurricane. So, there’s going to be some impacts of transit times as cargo moves through that region.

Ryan: Yeah, and it's early still, but it doesn't really seem like those disruptions are turning into this market, changing catalyst that some expecting it to be, does it?

Mat: No, I don't think so. It’s more indicative of what we've seen so far of a temporary disruption. The low to truck ratio and the spot cost per miles have increased and tightened some but similar to what we've seen in some of those short-term disruptions, we're actually starting to see some of these start to alleviate or flatten depending on the location and what as well which lends signals of some easing to come in the near future. And also, a lot of this impact is more regional in nature, and it hasn't gotten to the point where it's really pushing the envelope nationally.

Ryan: Yeah. And speaking of that, like kind of spreading out there have also been some questions about the impact of FEMA freight on the truckload market. The way this works is that some carriers, they have these standing agreements with the government to support freight inbound to disaster areas for FEMA and that can have transportation impacts further inland away from those affected areas because those carriers will move capacity away from those other areas to cover that FEMA freight.

So, shippers could see some route guide degradation if they use one of these carriers as they, you know, move a tractor or driver out of your region to support that FEMA freight. But again, with the amount of available capacity in the market, we anticipate that to be more of a temporary route guide nuisance than something that's going to fundamentally change how carriers are acting.

But before we move on from the impact of these disruptions, maybe a couple more quick points. I think the last few weeks really shows how our best laid plans can be disrupted, interrupted even too by these unexpected events. And it really underscores the importance of gauging the risk associated with shipping and receiving and the importance of communicating across your entire supply chain so that missed deadlines, stock outs, those types of things can all be avoided.

Scenario planning, creating playbooks and co-ordination with your strategic capacity providers. These are all critical steps to take during quieter parts of the year. Well, as of a quieter part of the year exists anymore, but when you have the chance and Mat, it's probably good to remind everyone that the port labor issue still isn't officially resolved. So, we can't assume everything's back to normal yet. Right?

Mat: Yeah, I mean, you're right. You know, we now kind of look forward into January 15th as the date, where it's the main point of contention, still to be negotiated, which is the port automation. And, knowing this will be a challenging point of negotiation, the government did apply pressure to settle on the salary issue quickly to allow more time to negotiate through this topic. You know, we're hearing mixed messages from shippers about how this is impacting strategies on the port.

As there seem to be, let's say, three common schools of thought. The first is a group that just diverted all orders to the west coast for the foreseeable future and will maintain there until everything's officially resolved.

The second is a group that's put orders over the next 4-to-6-week period, before and after the initial strike period. And they've diverted those to the west or other where, and then now they're going to have to make the decision of if they continue to do that in January or if they change their strategy in the new Year. And if you consider January being a quieter shipping season than the traditional peak season in early October, the risk tolerance could lead to different decisions.

I'd say the third group finally is they don't have much choice and they're hoping for a quick resolution, right? You know, I'd say, you know, example is imports where everyone's focused in on the lead up to the strike, bananas, right? You can't pull forward bananas and then start shipping them up all ahead of time and search that out. It's just not something you can reroute to the other side of the country either.  So, you're really just in a waiting period and hoping that there's a quick resolution and little disruption occurs in January.

Ryan: For sure. Well, before we move to truckload bid season, let's stick with international trade for another moment that the U.S. election as we all know is approaching and that has businesses wondering what impact the election could have on both the economy and shipping.

One of the biggest impacts is on trade policy. And I think the easiest way to see this is to consider that a Democratic administration will be highly focused on trade enforcement, while a Republican administration would be focused on tariffs to remove perceived advantages or loopholes that they believe some countries have.

And while a Republican government would likely add new tariffs, the current administration recently increased section 301 Tariffs for goods out of China, really to help derisk certain commodities that we import. Mat, you got any thoughts on section 301 updates, any key takeaways that stand out to you on that front?

Mat: Yeah, I have two of them, actually.

Ryan: Are you, you just going to leave me hanging on that? Are you planning to explain a little bit?

Mat: Well, you didn't say please. So.

Ryan: Ok. Fair.

Mat: Yeah. All right. So, I would say the first one is going to be strategic shifts and the second one is going to be the compliance and complexity really. So, on strategic shifts, we discussed this in our September freight update if you recall on how the U.S. is consciously de-risking certain commodity types that we import and imposing protectionist tariffs to avoid a flood of cheap products entering into the country.

The aim seems to be in continuing to address this trade imbalances, while also ensuring that we aren’t tied to a certain provider on any of these critical necessities.

Ryan: And when you say compliance and complexity, I understand that as you're referring to like increased vigilance with customs and border protection, how they're enforcing like ISF and document compliance, that sort of stuff.

Mat: Yeah, 100%. And so now is the time to ensure that you have a plan and a comprehensive understanding of your tariff classifications, your shippers, receivers, weight, ultimate consignees, et cetera, et cetera.

I would say the job measured is a job managed, right? And that’s one area where ignorant ignorance can abide, you know, so we actually have a trade policy program and we're happy to work alongside you as a trusted advisor to make sure that you  have a certitude on all of those elements  of their book of business there.

Ryan: Yeah, that's a great point. So, plenty of things for us to be mindful of as we navigate Q4 and then cast our eyes to Q1 in the New Year. It's, that's crazy that we're even talking about Q4 and Q1. But that’s life, right? But that also means that many shippers are currently planning or even executing their truckload bids for 2025 freight.

In our October Robinson report, we published a couple of weeks ago, we actually described best practices for executing a truckload bid through seven steps and you know, people can go and read those on their own on the report.  But Mat, you've been involved with bids and pricing for years. So, what are two things that you personally would like to point out that’s being critical.

Mat: I would say the two things I would focus on is data preparation and capacity strategies. And I'll explain that a little bit. So, data preparation, it goes beyond just taking what you moved your lanes for in last year or prior years. And then, oh, this is my area and subset of bids that I need to go out with this upcoming year.

It’s about taking all that and doing a cognizant effort to remove all the waste that's within there. Up to 70%, we’ve done these studies, up to 70% on average of all those lanes aren’t going to happen again next year. So why procure all of that whenever you can go through, take a cognizant effort to take those lanes that you know or have a high certainty that are going to ship again and then focus your efforts there.

Second part I would say is the capacity strategy. And historically, we do this spray and pray mentality where we take all of those lanes, you know that 70% or 30% or all 100%, and we put it out to bid in an RFP and we hope that we get route guided here to it.  But in actuality, life doesn't work that way, and you know, you get to a point where there's certain types of freight where you call a spade, a spade and you have certain route guide strategies for the different segmentation of your capacity.

So, you think of spot freight, if you have a cognizant effort to move into that spot market beforehand, as opposed to afterwards, you save a lot of money. And that's ultimately what both of these strategies do is, it's a little bit of planning and a little bit of foresight that helps you navigate your RFP season and, and ultimately put yourself up to succeed. And while all seven steps are important, these are the two that I most often see overlooked by shippers that need to be pulled back in full focus.

Ryan: That's awesome good tips. Also, in our October Robinson report, we did have our full year 2025 spot market forecast, but really for many shippers, 80% of their freight is contracted. So how does our forecast of a second half, 2025 rate increase impact contract freight?

Well, most people understand that the contract market typically lags the spot market by about six months. But when you're bidding for full year 2025 and there's an expected market rate change, well, it will influence the bid results.  And that's typical, and I think many shippers get that. But what’s different this year is the strong influence that carrier operating costs are going to have on this year's expected market rate increase.

I know we've been talking  about this since the summer, but it's just  proving more and more to be really important for  people to understand because carriers  have been sort of upside down for  several years when comparing market  rates to the increasing cost that they're incurring  and it's going to get to the point, it's  getting there, that the next market inflection  will probably be driven by those costs.

And it also means that when the cycle shifts, it could shift quickly because carriers are feeling that pressure to stay in business. So, our research with academic institutions over the years has shown that route guide performance and primary tender acceptance all suffer when the market becomes tighter, which is easily seen on this graphic that compares tender acceptance and route guide failure through different market types.

So, in a market where carriers have been struggling to cover their costs for several years, they are more likely to take the spot market freight at a beneficial price to them than they are to maintain that committed lane. So as shippers are considering their truckload bid strategy, our advice going into 2025 is that if you plan to be aggressive with your 2025 rates, then have a backup plan prepared for route guide failure.

Or an alternative approach could be to have collaborative dialogue with your participating providers that considers more of a sustainable pricing strategy that has a higher chance of success during a market shift. In the end, it’s a risk strategy and you're trying to deploy that, that it kind of balances that cost tender acceptance and service.

Mat: Yeah, I agree 100%. So, as we wrap up, I want to thank you all for joining us. And for more information on these details, check out our Robinson report and remember that C.H. Robinson goes further than anyone in providing you with global perspectives or how you manage your complex transportation strategy.