Allen Lund Company's Kenny Lund and Jimmy DeMatteis Discuss Transportation Cost Volatility
LA CAÑADA FLINTRIDGE, CA - From lumber orders pouring in following the California wind storms, to the rapid and greatly needed return of foodservice business, the need for efficient transportation has never been more evident. Costs are up for many along the supply chain, and transportation brokers are uniquely positioned to evaluate these market fluctuations. To help the industry get a better handle on the situation, I turned to Kenny Lund, Executive Vice President of ALC Logistics, and Jimmy DeMatteis, Allen Lund Company’s Des Moines, Iowa, Office Manager.
“Across the board, loads are up, and there has not been a big enough increase in the number of carriers and capacity,” began Kenny. “The rates are upward of 40 percent over last year. For refrigerated loads, we’ve seen absolutely record rates, especially out of California. This will all continue as we are now moving into summer buying patterns with pushes for seasonal holidays.”
Kenny stated that overall, ALC’s loads are up 20 percent. In the Des Moines office specifically, Jimmy told me that loads are up 38 percent. On top of this, carriers are experiencing a shortage of truck drivers. Kenny said that an estimated 50,000 jobs are open currently, and wages are up significantly for drivers.
“In past years, some suppliers may have seen freight as a necessary evil. But I think the pandemic has highlighted the importance of transportation in our supply chain,” Jimmy said. “As brokers, we deal with making appointments, reschedules, and accounting. But none of this could be done without the driver in the seat.”
Kenny noted that production has been up for the past eight months on Class 8 trucks. From the time that they are ordered, it usually takes about six months for them to enter the market, so new trucks are now hitting the road, and more are still coming.
With greater capacity, the gap between freight and carriers will lessen, and, inevitably, transportation rates will level out again. The question, as Kenny and Jimmy each reminded me, is when.
“It's all crystal ball, but I don't see anything happening that will lessen demand, which is what we would need for rates to come down. I don't anticipate any movement until after August when seasonal freight drops off, and maybe not even then,” Kenny continued. “Eventually, we will see a leveling-off and a decrease in the rates, although I can’t say when.”
Jimmy used an incredibly strong metaphor to describe this movement.
“My dad used to say, ‘The pendulum always swings,’ meaning that there wouldn't be a need for our industry if there wasn’t fluctuation in the market. When this pendulum swings to the shippers, where there's more trucks than freight, brokers can appear to cause challenges for the carrier community,” explained Jimmy. “But once the market shifts and there's more loads than trucks, carriers prefer to allocate their resources in the most efficient way possible. For probably 20 of the past 24 months, the pendulum has swung toward the carrier.”
Even with these market fluctuations, Jimmy emphasized that the relationship-focused aspect of the carrier business is what ALC is hanging its hat on.
“The shippers have a very long memory,” he said. “They're going to remember this when the pendulum swings, and it will swing.”
As we await the inevitable swing of the pendulum, ANUK will be here keeping you in the know on transportation updates.