Carrier revenge is a phenomenon in the freight industry where trucking companies leverage their position to negotiate better rates or selectively reject tenders, typically following a period of low rates and high competition. This shift in market dynamics occurs when the pendulum swings in favor of carriers, often as a result of changing economic conditions or unexpected events.
In recent years, shippers have held significant leverage in the freight market due to excess capacity, leading to what has been termed “shippers’ revenge.” During this period, carriers experienced plummeting spot rates and diminished profitability. However, as the market shows signs of recovery, there is a growing anticipation of carrier revenge.
Several factors contribute to the potential for carrier revenge:
- Market recovery: The Great Freight Recession appears to be ending, with tender rejections rising above 6% and spot rates increasing. This indicates a tightening market where carriers have more control over load selection.
- Capacity reduction: Upcoming regulations, such as the FMCSA’s Clearinghouse-II, could potentially remove a significant number of truck drivers from the workforce, further constraining capacity.
- Economic and political factors: Changes in economic policies, such as those potentially implemented by a new administration, could stimulate freight demand and alter market dynamics.
- Natural disasters: Events like major hurricanes can cause sudden demand shocks, leading to volatile rates and giving carriers an upper hand.
When carrier revenge occurs, it can be more impactful than shippers’ revenge. While shippers primarily deal with price increases, carriers can leave freight stranded on docks or disrupt factory operations by selectively choosing loads. This shift can catch shippers off guard, especially those who have become accustomed to the low rates and abundant capacity of recent years.
To prepare for potential carrier revenge, shippers are advised to lock in rates or diversify their carrier base. This strategy can help mitigate risks associated with routing guide breakdowns and ensure continuity in their logistics operations.
How shippers use SONAR to protect themselves from Carrier Revenge?
SONAR’s high-frequency market data is the best protection against carrier revenge. Through advanced signals and market intelligence, SONAR helps shippers stay ahead of developments in the freight market, well before they happen.
SONAR’s core value is encapsulated in the acronym BAMF:
- Benchmarking: Knowing the going rate on a given lane ensures that a truck will be available when ordered. SONAR offers benchmarking of rates across all 900,000 lanes in the US, providing shippers with the contract and spot rate on any given lane.
- AI-powered analytics: SONAR’s analytics are AI-powered, built to identify problematic lanes and opportunities. A rate is meaningless if it means that a carrier doesn’t show up when a truckload is tendered. The SONAR AI analyzes over 3.5 million new data points every single day to determine loads at risk.
- Monitoring: SONAR constantly monitors global freight demand, capacity, geopolitical events, economic conditions, and whether to determine whether a lane is at risk for failure or if there are opportunities to improve or lock in higher rates.
- Forecasting: SONAR’s AI-powered forecasting engine looks out a year ahead to determine the best routing guide plan. With high-frequency data combined with one of the most advanced AI engines in freight intelligence, SONAR provides shippers with data to forecast rates and identify lanes at risk up to a year in advance.
If you are interested in protecting your supply chain, sign up for a SONAR demo.
