Covid-19: Ground freight costs down, 3PLs and final mile carriers extending SLAs

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This is a continuation of our Covid-19 series where we discuss the impacts of the pandemic on different areas of the supply chain.

In this fifth post of the series, we investigate the impact on domestic logistics. In particular, we’ll look at ground freight, 3PL warehousing and last mile deliveries. 

 

Other posts in the series:

TNBT – How Flair, a $100k / month e-Commerce company is adapting to Covid-19

Covid-19: we’re here to help

Covid-19: China’s manufacturing capacity back to normal

Covid-19: International logistics status

Covid-19: Domestic logistics status – this post

Covid-19: Demand trends – upcoming

 

Ground freight

Let’s look at what has happened to demand, capacity and cost of US truck shipments–specifically, non-refrigerated semis (dry vans).

DAT, a freight platform which tracks over 150M trucking loads per year, recently released a report stating capacity is fairly steady relative to the same point in 2019, with ~300,000 trucks available.

Demand on the other hand has taken a 25% hit, with less than 300,000 requests for transportation, relative to the ~400,000 requests in the same week in 2019.

Figure 1. Upper graph shows the number of loads looking to be transported. Lower graph shows the number of trucks requesting loads.

Steady capacity but reduced demand has led to reduced cost. The rolling 7 day average cost per mile (excluding fuel) is currently at $1.38. This represents an 8% drop from $1.50 in 2019.

Figure 2. Price of load per mile. Solid red line represents the 7-day average in 2020. Solid blue line represents the 7 day average in 2019.

 

DAT gave an expectation of prices plateauing at their current rate over the next few weeks but said the most pessimistic view could see rates drop to $1.20 per mile (excluding fuel).

Figure 3. Forecast of prices ($ / mile, excluding fuel) through mid-May. ‘Ratecast’ being DAT’s expected outcome.

 

3PL

A fundamental aspect to any company’s logistics is warehousing. Many states have classed supply chain workers as essential, meaning 3PLs can stay open. We are going to look at the actions taken so far by Amazon and other 3PLs to enable continuous service. 

Amazon

Since March, Amazon has hired an additional 100,000 workers to cope with increased demand and have recently stated they will be hiring 75,000 more.

Unsurprisingly, they have implemented safety measures in warehouse locations. These include, checking employee’s temperature and more aggressive cleaning processes.

With increased demand, Amazon implemented restrictions on what items can be sent to FBA to help the workforce deal with the increased demand for essential items such as cleaning products, health-care items and shelf-stable food. On April 18th they lifted some restrictions but others still exist.

With essential items being prioritized customers are seeing high variance in delivery times. Vox is reporting that the same product is having differences in delivery schedules between 3 days and 3 weeks.

Other 3PLs

Other 3PLs like Shipbob, Shipmonk and Ruby Has are fully operational and have implemented similar procedures to Amazon with social distancing and work from home orders.

Some 3PLs like Shipbob have extended their SLAs by 2 days, presumably due to increased demand but reduced productivity with implemented safety measures.

 

Final mile delivery

FedEx, UPS , and USPS  have all suspended their shipping guarantees (SLAs) for some services. Meaning, if the carriers had previously committed to delivering your package within a set time frame, that time frame is no longer guaranteed.

Additionally, all firms have adjusted their signature requirement guidelines. They no longer require a signature for many products, and instead just ask for a customers’ name (at a safe distance).

 

If you are storing inventory at a 3PL and want to see if financing it makes sense, touch base with our team here (just add your email to the bottom of the page). A team member will reach out to set up a discussion to see how best we can help.

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