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Roundtable: Peak + Pandemic – Managing Carrier Capacity Challenges

The topic of this webinar is the COVID challenge in the supply chain. Due to the unprecedented times we talk about the supply chain being able to secure the capacity for the products to be shipped going into the holidays.

Roundtable - Managing Carrier Capacity Challenges
 Ali Carr
 

Green Mountain Technology hosted this roundtable, “Peak + Pandemic – Managing Carrier Capacity Challenges”, during this year’s Home Delivery World. See our Knowledge Center for additional presentations!


Transcript

 

Transcription: Managing Carrier Capacity Challenges

PHILLIP MILLER: All right, ladies and gentlemen. A quick introduction for the round table today. If you’re going to participate, and you’d like to speak with [have] the panel answer a question, I’d ask that you please have your camera turned on for a better engagement with the roundtable participants today. In the meantime of course, please keep yourselves muted. You have the option to unmute yourselves. Take the time to also rename yourself within Zoom (first name, last name, and company), so that people can easily identify you. Ask your questions in the chat. Make sure the chat window is open, you’ll find it at the bottom of the Zoom window there. And the topic today, Peak and Pandemic: Managing Carrier Capacity Challenges. Our moderator is Jeff Harper with Green Mountain Technology. Jeff, take it away.

JEFF HARPER: Thank you, thank you very much. Again, this is Jeff Harper, and I’m with Green Mountain Technology. We’re out of Memphis. The topic everyone is the [indistinguishable] with the COVID challenge in the supply chain, so it’s been peak all season long – since march. And now we’re going into the typical time of year from the peak, and so you’re layering that right on top of COVID. So, the demand for shippers is unprecedented, and there are challenges all through the supply chain – being able to secure that capacity for product to be shipped going into going into the holiday.

JEFF HARPER: So, you know, the panel is to give an opportunity to share findings, share successes, share challenges. I think really to get the table going, and I can start with some challenges–or just some questions to start the discussion. But what I wanted to mention real quickly, before we begin, is industry news. It kind of sets the scene for what what we’re all facing, and so looking at some Salesforce data, they are projecting worldwide that the capacity will exceed, will be exceeded by demand. So, shipping delays, higher rates which everyone is familiar with. Shippers can expect to hit – to be hit – with about $40 billion in peak delivery surcharges between the middle of November and the end of the year. And as the digital commerce, the E-Commerce business, is – about 30% typically is driven off of peak, so it’s really a perfect storm that everyone is dealing with. Some of the more well known challenges of E-Comm are doing things to attempt to level demand to get through, probably the best known example would be Amazon. So, they typically have their Prime Day in the middle of summer, June or July. This year, they delayed it due to COVID, but they reformed it at the beginning of October to attempt to pull demand forward and take the spike off of going into the holidays. They reported about a 60% increase over last year’s Prime Day, so they did have success in increasing sales to the event. No information on whether that will have success going into holiday peak with pulling the demand. I would say also that there are other retailers involved in similar strategies, those involve those type of earlier sales, early Black Friday sales, and really putting out some incentives on different popular products to get people used to the idea of shopping for holiday early. Typically people don’t start thinking about holidays until after Thanksgiving, and so that really is kind of along the lines of what I’d like, or would hope, to have some discussion on today. So, several items that just kind of lead off with one, and [I] would be very curious to know kind of what successes or challenges have you had or seen, failures or successes with the negotiating capacity with the national carriers, such as UPS or FedEx. And I’ll throw that out for discussion.

JEFF HARPER: What I have noticed, and what I would be very interested in hearing different perspectives on, is the capacity in some cases is available and others is not. But there is a price to be paid for that capacity with nationalism. Anyone else? Can anyone give some specific anecdotes, and what they have seen in their situations? All right, any help guys.

PHILLIP MILLER: Bob, we’ve got you muted. I think you’re trying to chime in.

BOB DISSINGER: Here, we go. Can you hear me now?

PHILLIP MILLER: Yes, loud and clear.

BOB DISSINGER: Okay, so Jeff, I, yeah. I’m the Director of Sales with Kinedyne, and what we found is with the freight capacities. And what we’re really seeing is not so much as the inability to get product out our door. But, especially with UPS and others, the surcharges, they’re really starting to mount up. If you’re [indistinguishable]–if your package is oversized, or, you know, overweight – things that they used to waive in the past – we’re suddenly getting surcharges. You’re shipping something into New York city, they’re charging an extra $85. If you’re shipping–we sell E-Track, ten foot long, they’re hitting us with huge surcharges. Our typical program with our distribution network is, we offer pre-paid shipment on certain size orders, and now we have to revisit that, because we’re seeing our freight rate, our freight costs, really start to skyrocket.

JEFF HARPER: All right, thank you, Bob. What about in terms of contracts that you may have negotiated with your carriers? Have they honored them? Have they come back to the table and changed their terms, and opened up discussions? Joe, perhaps you would care to share some experience on that. Or, anyone else.

JEFF HARPER: What I can tell you is, the clients that I deal with – we have seen a lot of that. And, so, even to the point we would have contracts, recently negotiated and signed, to be pulled off the table. I even saw a situation where an amendment was in the process of being negotiated, and a carrier pulled that off the table and offered a much more restrictive amendment to the contract. So, we are seeing that, unfortunately for the shippers, it is very much a seller’s market right now.

PETER BAIN: Yeah, so, I would say that the same thing – from a different perspective. So, this is Peter Bain, I work for Bunjii. So, Bunjii is an on-demand final mile delivery service for big and bulky items, and we’ve definitely seen, you know, some of our partners come back to us looking for just additional capacity. Kind of an auxiliary option – just demand that we weren’t seeing before. So, you know, in that sense it’s been good for us that we’ve picked up some more business that way. But it definitely seems like, you know, most of our partners are – their delivery network is stressed.

JEFF HARPER: Has anyone had any response from their carriers on volume caps, or basically stating that a previously understood volume level that they had indicated they’d be able to ship would be restricted even further?

LAUREN LAFFERTY: This is Lauren with Vari. We’ve seen a lot of restrictions with FedEx in the southern California area. They’ve restricted trailer pickup to only one per day, and with our items being bulky, it is seeing a lot of the capacity issues with processing those trailers in that area.

JEFF HARPER: Thank you. So, Peter kind of pivoting off of something you just said, you know, we had some discussion on the nationals, and the restrictions that everyone is seeing, and the challenges – that creates opportunity – that Peter mentioned – for other carriers, so can anyone share experiences with pivoting off of the nationals and looking for capacity with, well, start the discussion with the regional carriers that you may already be doing business with. Have those existing carriers that are not national – have [they] been able to provide any relief to the restrictions that you’re seeing?

JEFF HARPER: All right, how about carriers that you don’t utilize, that you have not considered before? Any any results, successes or challenges, have you been able to to find capacity you wouldn’t have looked [for] before, and has that relief been meaningful?

ALEX HUGELSHOFER: Hi, this is Alex working with lululemon, and I think what we’ve seen regarding international carriers is difficulties actually finding alternatives for those zip codes where a lot of carriers don’t really go to. So, specifically Canada Post that has been a struggle.

JEFF HARPER: So, the struggle’s been finding any carrier service those zip codes, or those postal codes, or that have capacity in those postal codes?

ALEX HUGELSHOFER: The combination of actually, and then getting capacity constraints, and issued pretty late in the game. So, from a timing perspective it’s–it’s really tough to actually pivot volumes.

JEFF HARPER: Have you found solutions at this point, or are you still looking?

ALEX HUGELSHOFER: It’s more working together with the carrier, like kind of the Post to actually, you know, find alternative induction models to kind of actually go around some of the capacity constraints. That’s kind of our main approach.

JEFF HARPER: All right.

CRAIG LOUGH: This is Craig from Dolly here. We’ve recently been approached a couple of times about helping to supplement what LTL carriers are doing. So, you know, customers are traditionally getting from point A to point B, and the final mile might be residential delivery, liftgate, those type of things. And the LTL network’s really getting clogged up at the back-end, so what our customers are seeing is the initial push is going really well, but they’re asking us about helping out on the back-end bottleneck as far as just picking up from the LTL delivery, or from the LTL terminal, and then handling that final portion.

JEFF HARPER: Others? Other strategies?

NATE SKIVER: Yeah, Jeff, this is Nate Skiver with LPF Spend Management, and so I’ve worked with the GMT team in the past. So, I’m familiar with the space, so I can comment a little bit on both from a client standpoint, but more so retail contacts that I’ve received some feedback from as well. Not as much from a regional standpoint, but certainly the alternative, you know, lightweight partial carriers such as, you know, Pitney Bowes, DHL, E-Commerce, certainly Pitney Bowes, I’ve seen even from the middle of the year until very recently some clients and contacts that I’ve had have reached out to them. They’ve been able to find capacity with Pitney to where that’s been able to relieve some of those uh, you know, origin capacity issues. DHL, I think, it was pretty widely known a few months ago that they stopped taking on new business in August to prepare for peak, and then pointing toward Q1, which I’ve had several discussions with clients, and contacts as well, of continuing those efforts to explore options into Q1. Where now, they’ve got their plans set and aren’t, you know, actively pursuing, you know, additional solutions.

JEFF HARPER: Thank you, Nate. You jog my memory on something we have talked about – UPS and FedEx – but with your mention of Pitney Bowes. Pitney Bowes inject, they provide the pickup and the transportation, but the final mile is provided by the post office. So, I’m just circling back to the post office, what discussions might have anyone had with the post office, either direct or by a carrier that provides the transportation and turns it over to the post office for a final mile. Any antidotes regarding that?

NATE SKIVER: I can comment briefly, Jeff. Just not as much on the contract, you know, part of it – as far as exploring opportunities for new business. But, yeah, I have one client who, it’s not a large amount of volume, but it’s over a million packages a year directly with the postal service and from a service perspective they’ve certainly seen, you know, a drop as you would expect in Q2. But then it’s been incredibly volatile since then, and so I think that’s something that in discussions that they’ve had with the postal service, and this has been my experience at least when I was on the shipper side as well, is unfortunately the postal service isn’t able to provide much insight into the outlook of the network and and how it’s performing any more than an aggregate level. So, it’s been a little bit frustrating for that particular client, because they’ve got some back-end reporting, where they can see um, you know, the delivery performance, but as far as monitoring the network and performance real-time at all – it’s it’s incredibly difficult. So, I would obviously expect that to get far more challenging in the next eight to ten weeks.

JEFF HARPER: So, along those lines, I have wondered regarding the post office, at least in my experience, I have not heard the post office say no to any volume. I have not heard them have any discussions about capacity limits, so that’s a bit of a black hole in my mind. Saying yes as an opportunity – how will they execute on that? So, any thoughts on that, any similar questions from anyone in the group? And if you’ve had those questions, where has that led to any type of an answer, and if you are utilizing the post office – what is your comfort level with them?

JEFF HARPER: Guys, I could talk the whole hour, but we would enjoy enjoy hearing from y’all.

NATE SKIVER: Well, and Jeff, I didn’t want to make it three in a row, but my feedback, I think, just briefly on that point is a bit dated. Although I’ll say that I’ve not heard from any clients or contacts in the last six months to a year that would change my opinion here, but on the, you know, the capacity I’ve not heard of any, you know, constraints limiting capacity, or pickup capacity. Granted that feedback has been with or from, I’ll say, kind of smaller to medium-sized shippers. Which it normally wouldn’t impact as much anyway, but I do think to your question about the USPS providing what what their plan is, or what the the state of the network is from a capacity standpoint, I would say I’ve not had interaction with them where they’ve either directly or through feedback where they’ve provided clarity and a, you know, precise plan in that regard like you would possibly get from a UPS or FedEx. So, I have heard concerns, you know, the client that I cited with them is probably not as much of a concern on daily basis for capacity, but there isn’t a clear plan for when volume spikes, and what the, you know, trailer plan is to react for the day. It’s, “we’ll make sure we get everything picked up,” and so while that’s reassuring for them to say that, there just isn’t a lot of substance that I’ve seen behind those kind of broad statements.

JEFF HARPER: That leads to another point that I’ve prepared, and that’s in terms of service level expectations going into this holiday. So, with the UPS and FedEx, they’re perhaps a bit more transparent than USPS would be, and even the regionals I might say that as well, but from a shipper standpoint what is the balance that you have gone through to determine, “okay, am I–I just need to get capacity,” and it’s a quantitative decision rather than necessarily a qualitative decision. And if you have been faced with that, what is the paradigm shift, too? What are you hoping to get to – is it a certain service level percentage, is it just to get everything under the tree in time to be opened up? Where are you seeing your strategies and your expectations?

PHILLIP MILLER: Let’s not forget to unmute before we answer the questions. You have the unmute button in the upper right hand corner.

PETER BAIN: So, I’m not sure if this really answers your question, but I can just chime in on kind of a shift that we’ve seen, because a lot of our partners are retailers. And obviously they’ve seen a big spike in E-Commerce demand throughout the pandemic, so, you know, with that there’s a lot more of that – the Buy Online Pickup In Store option. And we’ve been able to facilitate, you know, instead of picking up in store, we’ll just deliver directly to the customer, to the end user. And, you know, in turn that’s kind of turned retail stores into like mini local distribution centers, so that’s a paradigm shift that we’ve seen that, again, has created an opportunity for us. Not sure if that’s where you’re going, but just something that we’ve seen.

JEFF HARPER: Yeah, not necessarily, Peter, but it was certainly a point that I was wanting to broach in our discussion. So, just I guess in that segue – really the topic that I was going to mention, and Peter’s already given some preview of that is, you know, what are some strategies to flatten demand? I think I opened, well, I did open my discussion or the discussion with, you know, what might having early sales like Black Friday advertising, Amazon probably the most notable example, then Peter also mentioned the Buy Online Pickup In Store becoming a much bigger opportunity, or a much more utilized service or scenario than we’ve seen before. It’s even been in Pizza commercials, which I found ironic. Just a sign of the times I suppose, so I throw that back out to the group. Any other similar strategy that are either being deployed or considered?

NATE SKIVER: Okay, yeah, I can just share, I mean, a couple of, I don’t say anecdotes, but just from discussions, again with retailers as well, and it does align with what a lot of what’s been, I guess, you know, published on the topic of death, and also what the carriers are urging, you know, retailers to do. So, certainly leverage, you know, Buy Online Pickup In Store, Buy Online Pickup Curbside, and even just to some extent offering, you know, an incentive for the customer to do that whether it’s, you know, some, you know, nominal discount or something to where it will relieve a little bit of the partial volume in the network, you know. Others, you know, there’s one retail contact that I have that BOPIS has been especially helpful for them, even the first quarter before the pandemic it was gaining some traction. Then it kind of exploded, but at that point in time, six months ago, longer, they were planning a potential pilot for ship from store, and despite all the disruption in your – in their – supply chain and the challenges from that, they’ve pressed forward with that to at least try to to leverage some of the, you know, inventory. And that’s closer to the customer, so while it might not, you know, kind of offset some of that volume that they were, you know, not shipping with Buy Online Pickup In Store, they’re at least able to provide other options to shorten that transit time to their customers because of all the, you know, the lack of predictability that there will be, you know, shipping over the next eight weeks.

JEFF HARPER: Nate, what inventory challenges have they had with that fulfillment model?

NATE SKIVER: To date, so, that they’re pretty early in the pilot. So, it’s a small, it’s kind of a regional group, a few different regions of stores, so with that it’s still inventory accuracy is the the biggest challenge they’ve got. It’s a, say, a discount retailer, so they’ve got a really eclectic inventory assortment, and then of course the inventory is not uniform across even regional store bases, so then there’s been split shipments that you would expect as a challenge, but they’re pressing forward because they need to get to a point to where it is more efficient, and they can scale it. And if they, you know, didn’t start it this year, they’re going to be that much further behind, so it’s certainly – there’s been some some growing pains there, but they’re trying to expedite that process to get to a point where they’re more efficient with it.

JEFF HARPER: That is a good segue into a question that Alex had to the group, and that – Alex asked this question: he’d be curious to hear what the expectation is regarding the longer term supply / demand development. So, Nathan talked about it beyond this holiday and in the next year, and what his client is attempting to do to meet that. So, just to that question – other scenarios? What have you seen, either with your clients, your customers, or you as a shipper have seen in regards to how you might be thinking of capacity or carriers. Is it business as usual? Forgive and forget? I think there’s been frustration with the seller’s market that shippers are seeing right now, and I would have, personally, have been curious as to how that might play out with large shippers in the future when the pendulum swings the other way, and it’s not so much of a seller’s market.

CRAIG LOUGH: This now, this is from the the final mile portion, but, and and Peter, I know that, you know, Bunjii is a competitor of ours, so you’re probably seeing some of the same things. So, we’ve got all these customers that are pushing forward and saying, “let’s get started, home delivery, let’s get it,” and the majority of the population are not, not necessarily majority, but a lot of people are still at home, and they can take that four to eight hour window that a lot of the traditional final mile providers have been doing. And as that portion of the economy returns to work, I think that that’s going to create some challenges, because not everybody’s going to be able to take a half day, or a full day, off to get that that TV – to wait. So, as as we get into that, I think that there are going to be some customer expectation strains along the way, and that, ultimately, that should be pretty bullish for providers like Dolly and Bunjii that can hit more time definite windows. But it’s going to be a pretty big awakening, whether it’s a year from now, or a year and a half.

JEFF HARPER: What about diversification of carriers? Any trends toward that as a thought? I’m going to date myself a little bit, but having personally gone through a strike with a national carrier once upon a time, I remember with the blowback that that we received after that, and having our customers diversify their shippers and put their eggs in other baskets, and [I] would–and have wondered through this, if there might be some of that to be expected after peak as well?

ALEX HUGELSHOFER: I think some of the – Alex here again – kind of solves all the questions we are asking ourselves in regard to diversification, right? If you go out to market currently to, you know, find new carriers, just given the market environment, and that it’s just as such a seller’s market, right? Diversification might come at a price.

JEFF HARPER: And Alex, I would certainly agree that in today’s date, or in the here and now that is the case, but it isn’t always going to be a seller’s market. There’s ebb and flow, and so the wonder on my part is where that might wind up going.

ALEX HUGELSHOFER: Yeah, fully agree that’s exactly where kind of, you know, my initial question was coming from as well, too. I mean when do we expect that, you know, there’s more of a supply and demand equilibrium again. So, circle back to one of my earlier questions about opportunity for carriers that weren’t necessarily utilized previously by shippers, and I kind of direct this at some of the carriers that are represented here – what have you all seen in terms, I know I might have heard a comment, I believe it was from Peter, that it’s been very good in the here and now, but any more forward-looking inquiries about the services being provided as we get out of this situation for holiday and COVID.

PETER BAIN: Well, I mean just kind of, you know, generally speaking, I know that we internally don’t expect the, you know, E-Commerce boom to slow down. It seems like a lot of our partners – the point I was making like using the the retail stores more as like a local distribution center – it seems like, you know, from our perspective that that’s the plan for the foreseeable future. So, you know, we expect it to be full speed ahead with E-Commerce, and to Craig’s point, I don’t think customer expectations are gonna go down obviously, right? That they are expecting timely delivery, as fast as possible, so from our perspective that’s a – that’s a big opportunity. Yeah, so I mean we’ll see. We’ll see what happens, but we’re full speed ahead with the E-Commerce shift.

JEFF HARPER: And Peter, you mentioned the shift, and I used the term paradigm, and so, you know, just the thought that has occurred to me is – we get through the holiday, and we get through COVID, and whatever the new normal winds up being, I’m curious to see and will be anxious to see what the behavior changes the consumer will be there, you know. They’ve seen that they can work from home, they’ve seen that they can order from home and have delivery. Does that mean they’re gonna stay away from the stores to at least some degree? And how might that affect the the E-Commerce world moving forward?

NATE SKIVER: Yeah, I can comment on that, Jeff, and it actually, you know, part of it goes back to a couple of the earlier points about supply and demand as well. So, I mean, I think the consensus is that the shift that has occurred um, you know, to digital in some way will sustain. I mean, what percentage of that, you know, not exactly sure. But I think the impact on the parcel market, and volume specifically is, even with just the demand shift, I still think there’s going to be an incremental above that sustained, you know, partial volume increase. And, so, we’ve talked about, you know, shipped from stores, an example, with more retailers accelerating their efforts on ship from store. There’s a period where, I mentioned the one contact I had, where there’s a period of inefficiency, and already you’re generating more packages per order than you had prior, I mean, presumably. And so, I think with the continued demand, digitally, continuing to stay elevated, that’s still just going to drive even more parcel volume, and it won’t just be out of distribution centers. It will be out of stores, and so if if the higher percentage of it continues to be residential – which is higher cost to serve for the carriers – I think that prolongs part of the capacity challenges. Maybe not as as severe as it is now. And it prolongs the period that the carriers are in a favorable pricing position, so I think it will be, I mean, I don’t know what the timing will be, but quite a long time before the pendulum swings back even to the middle. Let alone to the the shipper side.

JEFF HARPER: And Nate, you brought up a point that reminded me something about my research about Amazon going into this holiday. They had mentioned that the density that they increased, that they are seeing, has been very helpful to the investment that they made in their fleet. They’re having more packages per stop in the residential areas, and the route densities are becoming greater. So back to your point made about the, you know, the sustained level of E-Comm shipments, and the cost to serve, and the residential deliveries. If that elevated activity remains in the future, and the carriers are seeing better density, I’m very curious to see if that will be – how that will be priced for lack of a better, well, we’ll just say what it is: priced in the future. Will that be passed back to the shippers, kind of an obvious question with an obvious answer. But my expectation is it won’t be passed back.

NATE SKIVER: Agreed, I think probably a lot of, well, of your clients, Jeff, with GMT, and some other certainly the larger shippers, I think perhaps would be in a better position, or better informed, to use that information certainly with the high volume that they might have, that they’re helping to create. Some of that density to possibly enable them to negotiate more, but I do think for everybody else, I wouldn’t expect necessarily for them to be able to realize, you know, direct benefit from that. I’m sure that the carriers will be happy to retain that margin.

JEFF HARPER: All right, we’ll move on to – I’m sorry, was somebody saying something, or is that just my feedback?

JEFF HARPER: Must’ve been my feedback. One other item I don’t think I’ve covered, I might have alluded to it, but it’s going back to customer experience going into this peak. So, I’m curious to see or hear if anyone has any feedback from customers on what what they realistically expect their customers’ experience to be – do their customers understand what’s going on in terms of the market, in terms of capacity and the challenges by the carriers and the retailers? Are they going to be surprised by any degradation in service, or is it is it a matter of just getting it before Christmas?

PETER BAIN: So, I mean I would say that we haven’t seen customers get any more lenient with their expectation. The final mile, I think, really it’s timeliness for us and, you know, we expect that to continue. And we’ve also seen from our partners, I mean, I, you know, can’t speak to everything but a lot of our retail partners have been less, you know, cost sensitive and more focused on the NPS and the customer experience. So, particularly in the final mile, that’s like the KPI is just delighting the customer, which again is a big opportunity from our perspective. So, that’s what we’ve seen, and I expect that trend to continue towards NPS over, you know, the last mile being a profit generator.

JEFF HARPER: Anyone else?

MARK SCHULEIN: Yep, this is Mark Schulein with Otter Products, and I’d say from a customer perspective – I’m not sure as much what their expectations are, but what we’re doing is relaying as much information as we can to our E-Comm team and making sure that we set those expectations on our website, and letting them know, you know, the last days that we’ve agreed to with our carrier, when they can expect to have shipments delivered before Christmas, and then just making it as clear as possible that delays should be expected because we’re not really sure how – what these peak volumes are going to look like for our carriers, and how it’s going to impact service.

JEFF HARPER: Thank you, Mark. Any figures that you’ve, or anyone, seen bounced around on what year-over-year growth the industry might be expecting, or your clients? I’ve seen a big range of numbers, and I’m curious to see if there are any numbers that have been mentioned by any of the customers you’re dealing with.

NATE SKIVER: Yeah, just a couple comments, Jeff. And it actually lines up with with a lot of what’s been published just in aggregate from a total increase in online demand, but a couple of clients have cited between 30 and 50% increase in online revenue and volume. Another one was a little bit more conservative, but it was still close to 25%, and so I think two of those three, well I guess, one of the three is entirely online. One has a very small store base, so probably not a huge shift of volume from stores to online, so it’s just organic growth. And then the third, which is the the one which had the, I guess the lowest increase overall, was a pretty large store base but also a pretty strong digital presence as well. So, I would say it’s been certainly between at least 30-to-50% from what I’ve seen, which has been the case periodically since the middle of the year. More in that 30-to-40% range probably, you know, prior to Q4.

JEFF HARPER: And make that range of increases – kind of mirrors what I’m seeing with my clients as well.

JEFF HARPER: All right, so I have kind of fed out some of the topics that I thought would be relevant to the discussion, and I’ve gotten one topic mentioned on group chat. So, I would say with the time remaining, which looks to be about about 15 minutes, I kind of wanted to throw it out to the to the group, and are there topics that we may not have covered, or not covered well, that are on your mind that you’d like to bring up for discussion?

JEFF HARPER: This is very effective use of time. We’ve answered everyone’s questions

CRAIG LOUGH: Jeff, I think you’ve done a great job with all the crickets so far.

JEFF HARPER: Well thank you, I am running out of steam though, so any – any topics anyone has? I mean we can certainly circle back and kind of revisit maybe some of the things that we’ve skipped over, but I don’t pretend to have the insight to everyone. Just as a reminder the the cat–you know, really this is a discussion centered on carriers capacity challenges, and trying to find capacity, shippers fighting capacity through the nationals or the regionals that they have experience with or, you know, I guess the topic, I, me personally, I’ve been in the business for a while and have heard of many service providers that I had not previously heard of. So, maybe that’s a topic to discuss, and I know we have some some carriers represented here, but are there carriers – even carriers I’m curious, just thinking out loud here, that have arisen in short order to be opportunistic to what’s going on. Any information or any observations that maybe anyone on the call has seen in that regard?

PETER BAIN: I mean, I think we covered it, but just, I mean from our perspective, we’ve seen a much more willingness to, you know, to work with somebody like us – who’s a kind of a smaller, just final mile carrier in specific geographies. But yeah, we’ve definitely seen more people coming to the table just looking for that capacity. So, yeah. And, in that sense, it’s been great for us like I was saying.

JEFF HARPER: So, Peter, where has that left y’all with capacity, because I’m presuming the percent increase in demand year-over-year significance from your base. And so it doesn’t matter if you’re a small, medium, or large shipper – that percent increase is critical.

PETER BAIN: Yeah, I mean we’ve handled it well. We’ve been able to scale quickly. I think that’s just the model that we use, and yeah, I mean, we’ll take as much as we can get. It hasn’t been a problem to this point.

JEFF HARPER: Others?

NATE SKIVER: I can comment just a couple of – it might be a little bit general, but through my discussions, be it, you know, clients or just retail contacts that I have, there’s certainly been more of a willingness to explore, you know, carrier options that, you know, weren’t explored before. Either because there wasn’t an interest, or maybe a lack of knowledge, but it’s been out of necessity I think for many shippers – particularly the large ones who would be encountering these capacity issues, and so, I think, you know, from my discussions, it hasn’t been, I mean, with maybe the exception of one case, a scramble to just go find any provider who has capacity and put them into your network. It’s been very, you know, it’s been a very selective process, but still taking the time to evaluate those options, get additional carriers in place to diversify your carrier base, mitigate some some risk, but really the inputs behind it has been those usually national carrier accounts have placed the constraints on the shippers. And so, I do think, at least I hope, that coming away from this, whenever capacity and demand starts to level set a bit, is that I think that many shippers will have either a developed plan around carrier diversification, or at the very least being more willing to engage with providers, you know, alternative providers. Whereas they may not have been, you know, open to doing so before. So, if nothing else, you know, I think there could be at least a bit more competition in that regard once, you know, the demand and capacity starts to level set to where there’s been, I guess, more more accounts, you know, and shippers engaged by these other carriers to where it’s a bit more broadly spread.

JEFF HARPER: All right, so I received a 10 minute warning on our time today, so kind of kick that back out one more time – probably the time to be talking about any topics that that you might have that have not been mentioned. So I’ll throw that back out to you all for potential responses.

NATE SKIVER: One thing, and Jeff, I think this was brought up – maybe not this directly – but with the capacity challenges, I know in some of the discussions I’ve had with some large shippers, you know, this is of course unlike any prior, you know, holiday season or fourth quarter and some of these shippers before could have productive, you know, discussions with the national carriers around capacity and either influence that through discussion only. Or in some cases, you know, from a surcharge perspective being willing to to concede a bit more from again from the shipper standpoint – what have you seen in that regard as the ability or kind of willingness, for usually the national carers, but maybe even others as well of basically allowing shippers to buy capacity? Because I’ve been hearing that that’s not been really the case very often, but I’m just curious to see if you’ve seen that.

JEFF HARPER: So, one situation I’m very familiar with, and I don’t know that I would determine buying capacity, but in essence that’s what wound up happening. Because this was a, or is a, client that is a very large E-Comm shipper and was in negotiations on an amendment to a contract and the national carrier came back and was trying to price out of a service. They – it was still a general service offering, but they no longer wanted to play in that space, particularly in terms of this going into this holiday, and so those negotiations went back and forth. And at the end of the day, they, not even at the end of the day, but at one point they had pulled that offering out from even consideration by the shipper. And then they came back with a price that was more expensive than the service that they were trying to get the customer to move to, so the enticement to that is, “okay, if you convert to this service, we will give you more capacity.” So, in essence they would be buying more capacity, and they didn’t really bite on that because they had another opportunity for capacity, and so that kind of goes back to an earlier comment that I had, and this situation informed that comment – I’m very curious to know in the future when things–when the pendulum swings the other way, what the change in that relationship between the shippers and the carriers will be. I’ve been around long enough, I’ve seen it on both sides, and I’ve seen sometimes long memory and sometimes not long memory, but I would be very curious to know how punitive that relationship might be in the future.

JEFF HARPER: And Nate, I think you had – we’re talking about in terms of surcharges, and one comment I would make is and, you know, what success have my clients seen in being able to negotiate any consideration on that. And I would say at the end of the day, very little. Even the regionals are – they might be creative in the ways that it’s billed, but at the end of the day they’re going after a certain dollar number. And they have not, neither the nationals nor the regionals that I have seen, haven’t budged on that. And that comes right back to – [it] doesn’t matter who the carrier is, it’s a seller’s market right now.

NATE SKIVER: Yeah, I’ve seen much of the the same, Jeff. In most cases, I mean, there’s a finite – if we’re talking about, you know, partial carriers, I know there’s plenty of other, you know, types of providers, but from a peak surcharge. Because it’s gotten a lot of attention, deservedly so, but I’ve not seen in too many instances, you know, significant concessions there. And really, I don’t think that the carriers have an incentive to do that right now, because there aren’t that many, you know, alternatives. The pricing floor has been raised dramatically, at least for the short term so, you know, maybe that won’t be best for for long term, you know, goodwill and relationship, but right now I’m seeing the same thing.

CRAIG LOUGH: Jeff, you talked about the relationship piece, too, and kind of, you know, when the market flips, I think is, you know, whether it’s Parcel, LTL, truckload, final mile – every single market ebbs and flows over time, and you can look back on 20 years worth of data, and it’s like a constant roller coaster. So, I think the big thing with the relationships is how the message is delivered, so charges are what they are, but if you get good factual information that you have to walk into that customer and say your rates are going up for X, or here’s your cap [and] here’s why, and then you can paint the picture of this has been our relationship over a year’s period worth of time, you have not exceeded this or that – that type of stuff, that can really go a long way in the relationship. Because from the shipper’s angle, when you’re getting price increases you have to pass that on and let your boss know, and you need more information than, “hey, carrier X just said this is what it is, let’s go for it.” And then the flip side, when the market’s dropping, the shipper needs to be able to turn around that information to the carrier, and say, “here’s why.” So then that individual can take it back, so you’ve got prices – the market is what it is, but it really just boils down to, you know, relationships for the long term.

JEFF HARPER: All right, looks like we have but a couple of minutes left. So start to wrap this up, and so I would personally like to thank y’all for the participation today. I very much enjoyed, not only preparing for this, but the discussions and the perspectives that, I personally, have picked up in the time we’ve had today. So, again thank you all very much. It was a privilege to be part of this.

PETER BAIN: Yeah, thank you, Jeff.

PHILLIP MILLER: Big thank you to you, Jeff, for moderating the session, and to everyone who participated [and] joined in actively in the conversation. You can continue the chat in the Home Delivery World virtual platform, and connect with each other in the platform as well – and outside of it. Thanks everyone for joining the roundtable today. Have a good weekend, thank you!


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Roundtable - Managing Carrier Capacity Challenges

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