Transcripts
Welcome to Unboxing Logistics.
Speaker:I'm your host, Lori Boyer, and we have one of my favorite guests on the docket today.
Speaker:It's our third time with Dr. Chris Caplice.
Speaker:He is such a fan favorite here at the Unboxing Logistics family.
Speaker:He always has the greatest insights, lets us know what's going on, tells
Speaker:it to us as it is, and so I'm really thrilled to have him here in 2026
Speaker:with all the craziness going on to kind of walk us through everything.
Speaker:Chris, what, what have I missed about you?
Speaker:So I'm Chris.
Speaker:I've had wear two hats really for today.
Speaker:I'm up at MIT at their Massachusetts Institute of Technology, their Center
Speaker:for Transportation and Logistics.
Speaker:I'm the executive director there.
Speaker:I've been here for a little over 20 years.
Speaker:Got my PhD here back in the nineties.
Speaker:But CTL up at MIT.
Speaker:Like I said, it's been around for 50 years, and we work with shippers,
Speaker:carriers, manufacturers, retailers and try to drive innovation that
Speaker:we come up with into practice.
Speaker:We're very much driven about changing and impacting the industry.
Speaker:In addition to what I do up here at MIT, at CTL.
Speaker:In addition to the freight lab that I also run up here, I'm also
Speaker:the chief scientist at a company called DAT Freight and Analytics.
Speaker:And if anyone knows anything about trucking, DAT is the source for
Speaker:analytical data and analysis in the trucking in the freight industry.
Speaker:Absolutely.
Speaker:Chris does so much in this industry and I love having him
Speaker:on and getting his insights.
Speaker:Chris, before we dive fully into kind of how shipping strategies
Speaker:have been changing lately, I want to talk a little bit of kind of what
Speaker:we're seeing with the geopolitical craziness in the world right now.
Speaker:I feel like the freight market has generally been a little calmer.
Speaker:We saw a lot of chaos a few years ago.
Speaker:But with all the geopolitical disruptions going on, you know, Iran.
Speaker:Shipping risks around the Strait of Hormuz, all of that kind of stuff.
Speaker:From where you sit, what, how do you feel like the state of the in industry is.
Speaker:Are, is it calmer?
Speaker:Are we gonna be entering volatility?
Speaker:What, what are your thoughts?
Speaker:Yeah, so the the, the truckload market, yeah.
Speaker:It's constantly changing, right?
Speaker:You're right, we saw extreme patterns during the pandemic from the
Speaker:spring of 2020 to the spring of 22.
Speaker:But since the spring or summer of 2022, the last three and a
Speaker:half years have been pretty flat.
Speaker:You contract rates have been flat, spots been creeping back up.
Speaker:Spot's always the canary in the coal mine for contract.
Speaker:But whenever you look at the market, the, the two big forces, and this
Speaker:is not new, is supply and demand.
Speaker:And so because the, the supply and demand are constantly shifting in
Speaker:this very volatile market, then you're gonna see prices going up and prices
Speaker:going down on a regularish basis.
Speaker:But it, it's not like seasonality.
Speaker:And so, yes, we're seeing some change, but if you look at what we, where we
Speaker:are right now, or even back in January 26, compare that to January 2025.
Speaker:It was almost the same place, but what happened in 2025, all the tariffs hit
Speaker:and that caused so much uncertainty.
Speaker:The market kind of cratered 'cause it was correcting, we were seeing spot
Speaker:in contract, you know, increasing and the tight market is when
Speaker:spot is above contract and it's soft when it spots below contract.
Speaker:And we saw that happening.
Speaker:The tariffs just changed that and froze that.
Speaker:So we kind of, again, retrenched for last year in 2025, 26,
Speaker:that's not happening as much.
Speaker:Companies are much more comfortable with the idea of the tariffs and realizing
Speaker:that it's more negotiating a lot of times.
Speaker:So that kind of has been absorbed.
Speaker:But what we are seeing is that supply is changing dramatically.
Speaker:A lot of the regulations that have come recently the English Language
Speaker:proficiency tests, the non domicile shutting down the CDL mills, all good
Speaker:things, to be honest, to get there's a kind of a hole in the system.
Speaker:That's increasing the cost of being a carrier.
Speaker:So it's reducing the, it's increasing rather the barrier of entry.
Speaker:So it's kind of constricting some of the supply of carriers.
Speaker:What does that mean?
Speaker:It's not uniform across the whole United States.
Speaker:It's happening in pockets, mainly in agriculture and produce.
Speaker:And we're gonna see this more as produce season kicks off.
Speaker:But we're seeing a contraction of the, of the supply a little bit.
Speaker:Demand, you know, it's mixed signals.
Speaker:It's not, not dramatically increasing like we saw in the pandemic.
Speaker:So we are seeing some tightening.
Speaker:And we are gonna see a tightening of the market throughout 2026.
Speaker:Some people are saying the spot market's gonna go up double digits,
Speaker:20, 30% compared to where they were.
Speaker:I'm a little more in line to low double digits, like 10 to 15%.
Speaker:I think that's happening.
Speaker:The other thing that's gonna impact that now that you alluded to that just
Speaker:happened in the last two weeks is fuel.
Speaker:So the impact of all the things happening in in the Middle East right
Speaker:now is that we're seeing that the price of fuel, it topped a hundred dollars
Speaker:a barrel and probably is gonna be bouncing around there, maybe going up.
Speaker:So that's gonna have a disproportionate effect on supply as well.
Speaker:It's gonna impact the smaller carriers on the spot market much more heavily than
Speaker:the large enterprise carriers in contract markets, 'cause those guys already have
Speaker:fuel surcharge programs that share the risk already and kind of moderates that.
Speaker:The spot market, it's usually an all in rate and they're gonna get caught
Speaker:short, especially with a sharp rise.
Speaker:So that was a long winded answer to say yes, the market's getting more
Speaker:volatile, it's starting to tighten up and we'll see the, what's gonna
Speaker:happen over the next several months.
Speaker:So, Chris, I know we have some agriculture viewers and, and listeners here.
Speaker:So talk to me a little bit about that.
Speaker:You mentioned them specifically.
Speaker:Are there reasons that they are struggling more or what can they expect
Speaker:as we are coming up on that season?
Speaker:So, if you look at certain markets especially coming outta California,
Speaker:they have a very, very high percentage of, of carriers or drivers that are
Speaker:immigrants and they are more subject to these regulations that we just mentioned.
Speaker:And so we're seeing a lot of the coming out of Southern California
Speaker:and coming outta the northwest.
Speaker:Spot rates are increasing because a lot of the capacity is, is being withdrawn.
Speaker:The other thing's coming out, and maybe it's not as much anymore.
Speaker:There's some hesitancy from some drivers to go to certain areas because of ICE.
Speaker:You know, then maybe they, they just, the, the risk of it, the, the perception of
Speaker:the risk of being deported is is high.
Speaker:And so there are some anecdotal evidence that we have that some drivers are
Speaker:hesitant to going to certain areas.
Speaker:If you do that, that reduces the supply and it might increase the, the spot rates.
Speaker:Okay.
Speaker:So given that, I guess let's talk shippers, do we feel like
Speaker:maybe they are still relying too heavily on the spot market?
Speaker:Are they focusing on lowest cost?
Speaker:Like what, what is the state of the shippers right now?
Speaker:How are they responding to all of this kind of chaos?
Speaker:Yeah.
Speaker:Shippers have always, I mean, cost is always the number one objective.
Speaker:We're, I mean, from a shipper's perspective,
Speaker:transportation is a cost center.
Speaker:It, it just is.
Speaker:And so you can use very strategically to be, do strategic advantage,
Speaker:but the actual thing, you, you try to drive the cost down.
Speaker:However not at all, all costs.
Speaker:And so I think shippers over the last several years have become much more
Speaker:sophisticated at balancing that because the most the, the lowest cost solution
Speaker:is usually the most fragile solution.
Speaker:And so you have to look and see what you wanna protect for.
Speaker:And so we're seeing the shippers are being much more cognizant of using low
Speaker:cost, and it's not necessarily spot.
Speaker:Spot makes a ton of sense for, for use.
Speaker:In fact, one of the biggest mistakes that some shippers make is they try
Speaker:to use contract rates for everything, and it just doesn't make sense for
Speaker:certain lanes that are sporadic, low volume, things like that.
Speaker:I've heard you mention, and you know, I follow you, the importance
Speaker:of kind of carrier stability.
Speaker:Like we've had a huge focus, as you said, it's always cost.
Speaker:Cost is a big deal.
Speaker:I was just reading a study recently that in 2026, companies are taking
Speaker:on more of the costs of the tariffs and everything than they did in 2025.
Speaker:So cost is even a bigger deal for them right now.
Speaker:So what is stability?
Speaker:I mean, we're, I guess when we're talking those lowest cost carriers.
Speaker:If there are some stability issues, tell, tell the audience what, what it
Speaker:is you've been saying about carriers.
Speaker:I, I think of in terms of consistency, right?
Speaker:Every carrier wants to have consistent volume and they want to
Speaker:have a consistent customer base.
Speaker:And shippers want to have consistency as far as the, the carrier's going.
Speaker:So people, we like status quo.
Speaker:We don't, no one likes to see the carrier base change every year, every six months.
Speaker:So you want that consistency 'cause they know the business.
Speaker:It's more than just changing a name on a spreadsheet, right?
Speaker:It's actually the driver and the knowing where to go knowing the systems.
Speaker:So there's, there's a value to incumbency and so whenever a ship does a bid, right?
Speaker:They always have a dial that they want to do to say, well, how much am I willing
Speaker:to pay above the very lowest cost?
Speaker:Because if you run a bid and you have a bunch of carriers submit, you can always
Speaker:look and say, what is the absolute lowest if I take the lowest bid in every lane?
Speaker:You look at that and you never wanna tell anyone that number.
Speaker:But then to make it a more business optimal, you're gonna say, well,
Speaker:this incumbent, yeah, they're 3 cents more a mile over the
Speaker:lowest cost, but that's worth it.
Speaker:So now I'm giving back.
Speaker:Right?
Speaker:And so, in times when the market is really soft, they might go the other way.
Speaker:They might try to go the, the very lowest cost and look for reductions from the
Speaker:previous rates they'd been hauling.
Speaker:In markets that's tightening, they might want to give back 'cause they
Speaker:want to keep those carriers interested.
Speaker:So what we're seeing now, instead of trying to ratchet down and save
Speaker:every penny, we're seeing that shippers are giving back 3, 5%.
Speaker:And they're doing that to make sure that those, those carriers stay with
Speaker:them and they don't have to renegotiate them when the market gets even tighter.
Speaker:So there's different ways that, that shippers will do this.
Speaker:They might say, I'll give you an X percent increase and I won't
Speaker:put that lane in the bid for you.
Speaker:So that you kind of let the incumbents they opt out of the, the bid, or you can,
Speaker:there are other ways that you can do that.
Speaker:But both shipper and carrier want consistency.
Speaker:They want to have reliability of both the volume and of the capacity.
Speaker:There has to be a little bit of a mix I would think too though,
Speaker:in terms of risk management.
Speaker:Like I was just talking to somebody recently who said they have, they
Speaker:always just use a single carrier, right?
Speaker:Because of maybe that comfort level of like, I know them,
Speaker:I know what's gonna happen.
Speaker:But to me that that creates a diversification risk if in this
Speaker:crazy world something happens.
Speaker:So how do you balance that, I guess?
Speaker:I, I don't know any shipper that uses a single carrier for their entire network.
Speaker:Maybe for a lane, you might do a primary for that.
Speaker:But the, the beautiful thing that shippers do, and I think this
Speaker:makes sense, is you always wanna look for new carriers coming in.
Speaker:Always.
Speaker:And so the way that a shipper will look at the procuring of their
Speaker:network, they, they might have an annual RFP, that's the big bid, right?
Speaker:All lanes they go to a bunch of carriers and they spend a lot of time analyzing it.
Speaker:But things happen throughout the year.
Speaker:Facilities come and go.
Speaker:They get turned online.
Speaker:New customers you know, some lanes fail with carriers, so
Speaker:there's always corrections needing to be done to the routing guide.
Speaker:And so those mini bids that happen, a lot of shippers will do them monthly.
Speaker:You know, they're kind of like catch up bids, and the,
Speaker:the focus there is on speed.
Speaker:Let's get some rates in.
Speaker:So that's the best place to introduce new carriers.
Speaker:You have new carriers who have been knocking on your door, they've
Speaker:been calling you saying, you know what, let's, let's maybe give you
Speaker:some business on this mini bid.
Speaker:And test out might give them half a dozen lanes, see how they do.
Speaker:And they, they earn their way into the larger bid.
Speaker:So I agree, you shouldn't just use the carriers you've been using all the time.
Speaker:You, you want to introduce some new blood.
Speaker:But do that in a very controlled way.
Speaker:You don't just suddenly switch to this new carrier you haven't used before, 'cause
Speaker:then you get into the winner's curse.
Speaker:You don't know.
Speaker:You know, right now you have the devil you know.
Speaker:You don't know that other devil.
Speaker:That's so true.
Speaker:So do you have any recommendations for, I know I hear from a lot of people,
Speaker:you know, you mentioned reliability specifically that people are looking for.
Speaker:Are there specific things when they are kind of vetting some of
Speaker:these newer carriers that you would recommend, you know, red flags or
Speaker:green flags in terms of reliability?
Speaker:So, so when I, when I was talking about reliability and, and you
Speaker:know, consistency, that's kind of consistency of business, right?
Speaker:For regular evaluating the carrier, it's whatever KPIs
Speaker:they're constantly looking at.
Speaker:It's the acceptance for, for truckload, it's carrier acceptance.
Speaker:Do they accept the load?
Speaker:You know, damage, on time, all the, all the standard things you wanna look for.
Speaker:I think that's why it's best to test them out in a small
Speaker:sample and so see how they do.
Speaker:And then you continue to grow their, their business.
Speaker:'cause they earn, they earn their right to handle more of your business.
Speaker:'Cause the big threat for these contracts you have is they're, they're not binding
Speaker:in terms of penalties or anything like that, but it's the future business.
Speaker:So them doing better earns them the right to get more, more business.
Speaker:That, that's generally how I see most shippers look at it.
Speaker:Okay.
Speaker:Love that.
Speaker:Love that.
Speaker:They need to earn the right to get more of your business.
Speaker:Fantastic.
Speaker:I love that.
Speaker:So as we're talking about finance and cost, a lot of times people want
Speaker:to go maybe with not the lowest cost because the risk, but it's not always
Speaker:easy to sell to your finance team.
Speaker:Do you have tips or recommendations on that?
Speaker:Yeah.
Speaker:This is one of the big things that we do at DAT.
Speaker:We, we constantly trying to arm the transportation executive with the right
Speaker:tools and the right message to make sure that the CFO and the CPO, the chief
Speaker:purchasing or finance officer understands why they're making that trade off.
Speaker:And the most important concept is that transportation
Speaker:pricing, especially truckload transportation, it's all relative.
Speaker:You know, you gotta see how you're doing compared to the market.
Speaker:Because the market, like we said, is constantly changing.
Speaker:If you go back 10, 15 years, you can see the cycles come generally
Speaker:in 30 to 48 months increments.
Speaker:Not exactly each time.
Speaker:And so what really matters is, how am I doing relative to the market?
Speaker:Am I below the wave or am I above the wave?
Speaker:And so to do that, to see where the market is, it's critical that you
Speaker:have good information and good data.
Speaker:And there's so much, the, the amazing thing that's happened over the last
Speaker:20 years, they're the source of data that's out there is incredible.
Speaker:Not all of it is good.
Speaker:Not all data is created equal, right?
Speaker:And so that's why what we do at DAT, we only use invoice data and you know, we
Speaker:have actual data out there and we use that to see where the market is going
Speaker:and use that as a compare something you can compare to for how you're doing.
Speaker:And so, the way that we like to recommend for transportation executives
Speaker:is compare yourself to the market.
Speaker:And every shipper will be above the market in some lanes and below
Speaker:the market in some lanes because you have different characteristics.
Speaker:If I'm shipping just paper products, right, and I don't care if it's the
Speaker:same week that it gets delivered, on time's not as critical, I will probably
Speaker:be willing to spend less money, right?
Speaker:I, I don't care.
Speaker:But if I needed to be on time with a one hour window, I'm
Speaker:probably gonna have to pay more.
Speaker:So if we can compare to the benchmark and you can explain
Speaker:why am I above or why am I below?
Speaker:And that helps you explain to your CFO why you're using a certain carrier.
Speaker:And so it, it really is more than just what you're spending.
Speaker:It's how that compares to the market, which data is critical, but then
Speaker:explaining the differential why and because what you wanna do for the
Speaker:market, you want to see what the general market is, and you're gonna
Speaker:be either below it or above it and be able to explain each of those.
Speaker:Now, absolutely.
Speaker:I love.
Speaker:Good data leads to good decisions.
Speaker:I think that, so critical.
Speaker:And we do, as you said, Chris, there is so much good data.
Speaker:I, 20 years ago, it was hard sometimes to figure that out,
Speaker:but there are those benchmarks.
Speaker:You should be doing the research, you should be finding out where you lie.
Speaker:And honestly, finance teams, that's all.
Speaker:They love the data.
Speaker:The other thing that something comes out from finance, there's a couple things.
Speaker:First.
Speaker:Procurement guys think that economies of scale dominate, and, you know, if I buy
Speaker:more, I should be paying less per unit.
Speaker:And, and the, the hard lesson for CFOs and CPOs dealing with truckload
Speaker:transportation for the first time is that that is not the case.
Speaker:In fact, the larger shippers, the larger buyers of of truckload
Speaker:transportation spend more per mile.
Speaker:Right.
Speaker:You know, they then, then a smaller buy because your network
Speaker:gets more dispersed and you have lanes that are not as high volume.
Speaker:So the, there are no economies of scale to truckload transportation procurement.
Speaker:That's lesson one.
Speaker:The second lesson is that a lot of CPOs will wanna put a contract
Speaker:in place on every lane, and that's called the coverage strategy.
Speaker:Because then you, you, you have a sense of your budget and what you're
Speaker:gonna spend, but anyone who's been in this industry long enough knows that
Speaker:putting a contract rate on a lane that you have two loads per year.
Speaker:It's worthless.
Speaker:It's not worth the time you spent or the paper that it's printed on because it
Speaker:probably won't come to fruition, that the carrier probably won't have a truck
Speaker:there that specific week that you need it.
Speaker:So that's where it comes back to a point you made earlier, the use of spot.
Speaker:We're finding that carriers, shippers rather are much more Strategic in how
Speaker:they use spot, and they should be.
Speaker:So if you, you look at the amount of, of lanes that you have, the, the lanes you
Speaker:have are probably like 30 to 40% of your lanes will handle 80% of your volume.
Speaker:But the other lanes, the 60, 70% will handle just like 15 to 20%.
Speaker:So those ones you don't wanna put contract rates on.
Speaker:You wanna have some kind of dynamic pricing or low volume strategy, and
Speaker:there's different ways you can do that.
Speaker:But one of the pushes that you have to guard against is the CFO or the CPO might
Speaker:want to contract for everything, 'cause they think that's like, it's like Linus's
Speaker:blanket, it makes them feel better.
Speaker:But in fact it, it causes more problems than it create
Speaker:more problems that it fixes.
Speaker:But it's okay to have contracts for the big lanes.
Speaker:Yes.
Speaker:And you know where the, your 60% of your stuff's going through.
Speaker:Just those other ones, it doesn't make a lot of sense.
Speaker:Yeah.
Speaker:The vast, vast majority of your volume will go under contract.
Speaker:The vast majority of your lanes will probably be spot.
Speaker:Okay.
Speaker:Yeah, that makes sense.
Speaker:Are there any signals or signs that you would say it's time for a shipper maybe
Speaker:to be revisiting some things, to be looking for new carriers, to be, you know,
Speaker:expanding or, or contracting as well?
Speaker:Yeah, always.
Speaker:So you want to use that, those benchmarks that we talked about.
Speaker:So having good quality market benchmarks, 'cause the market shifts.
Speaker:Right.
Speaker:And every carrier's network shifts.
Speaker:Their economics change as they get new customers and shed
Speaker:other customers, 'cause then the dynamics of their network changes.
Speaker:Because in truckload trucking it's all economies of scope.
Speaker:In other words, the cost of me going from A to B is really a function
Speaker:of how am I getting to A and what am I doing after I get to B, right?
Speaker:If I have a round out and back, you know, the holy grail of a truckload
Speaker:transportation, that changes my, what I can charge on that, that forehaul lane.
Speaker:What I do in the back haul influences my forehaul.
Speaker:So because of that, the market's constantly changing, not just on a macro
Speaker:level, but also on lane by lane level.
Speaker:So always be looking how I'm comparing to that benchmark.
Speaker:And if it gets the gap gets too big and you can't explain it due to service
Speaker:requirements or other things, then that's a time to revisit, whether it's
Speaker:a direct conversation with a carrier there or a mini bid or some other action.
Speaker:So how often, if you were gonna give it a timeframe, I know we
Speaker:say everything's always changing, but for some people that's like,
Speaker:okay, once a year I'm gonna look.
Speaker:And some people are like, every hour I'm checking, you know, where is the line?
Speaker:Do you have recommendations of how often they should be keeping an eye?
Speaker:Yeah.
Speaker:And so I think it is, it's a great question, Lori.
Speaker:And so I think you have different drum beats of things you do every day,
Speaker:every week, every month, every quarter.
Speaker:So every day you just kind of.
Speaker:Look at the real problem lanes, right?
Speaker:Did something just out of whack.
Speaker:And it's mainly looking at on time, those kind of things.
Speaker:I think a weekly cadence is good for just seeing if some carriers are
Speaker:getting out of whack, just the high level, but monthly carrier meetings.
Speaker:I think that makes sense at touch base and look at them over the course of
Speaker:a month, that's a better snapshot.
Speaker:And that's when you can run mini bids or you might even wanna push those to a
Speaker:quarterly drumbeat, but I think you wanna have a series of escalating metrics
Speaker:and, and, and checkpoints at the daily, weekly, monthly, and quarterly levels.
Speaker:I so agree.
Speaker:I'm that kind of person I need to put in, put it in my calendar, make sure I've
Speaker:got it scheduled, or you will forget.
Speaker:And pretty soon you look back and you've got all kinds of problems popping up, so.
Speaker:Yeah.
Speaker:And so what we, what we found that works really well at DAT is every Monday we
Speaker:ship an email comes you automatically from the data you have with us.
Speaker:That kind of gives you a snapshot of, of what you, where you stand in the market.
Speaker:It's a good way to say, okay, where should I focus on?
Speaker:Are there lanes that I need to be really worried about?
Speaker:What's under control?
Speaker:It helps you focus so you can manage by exception.
Speaker:Yeah.
Speaker:Love that.
Speaker:Love that.
Speaker:Okay, I'm gonna get some of the questions that people have submitted, but first
Speaker:I wanna ask, is there anything that you see shippers doing that you're
Speaker:just like, please stop, don't do this.
Speaker:Don't you know?
Speaker:What is a mistake that you would just recommend people stop doing?
Speaker:Well, one is that we've, or we, I've been saying the last couple minutes, is don't
Speaker:try to put a contract rate on every lane.
Speaker:It's a waste of time.
Speaker:And we've shown up at MIT some analysis I've done with my colleague, Dr.
Speaker:Angie, Achocella is to show that if you have, you, you put a contract
Speaker:rate on a lane that you do in your bid and a carrier wins it, right?
Speaker:You set up the contract the probability that it doesn't
Speaker:show up at all is very high.
Speaker:And that we call that ghost lanes or ghost freight.
Speaker:And we found in some shippers that can be as high as 50 to 60%
Speaker:of the lanes they put out to bid.
Speaker:And we found that by doing that, not only does it waste everyone's time but
Speaker:it leads to higher rates from that carrier that you ghosted next year.
Speaker:And it's almost a one to 2% difference in how their rates will be.
Speaker:They submit next year.
Speaker:So it not only wastes time, which is critical, it leads to negative effects.
Speaker:So don't try to set up a contract for everything.
Speaker:Wow, that was crazy.
Speaker:50, 60%. It was unexpected.
Speaker:But now it's very low volume because the idea is don't put a contract out
Speaker:on anything that didn't have at least, I don't know, 26 to to 50 loads.
Speaker:If it had like 3, 4, 5, it's not worth it.
Speaker:Have a mechanism, whether it's APIs or set a core of carriers that you give those
Speaker:late, those lanes to have a different mechanism than a routing guide contract
Speaker:that falls a a, a waterfall method.
Speaker:Okay.
Speaker:I love that, and I love that you gave numbers because it kind
Speaker:of ties into my first question.
Speaker:How do you find the balance between committed capacity and the spot market?
Speaker:You've been talking about that a lot, but is there anything, I love
Speaker:how you said, what was it, 26 to 50?
Speaker:Do you have any numbers kind of where people can use as a benchmark?
Speaker:When you say committed, I, I assume what you mean is a contract.
Speaker:A contract, yes.
Speaker:'Cause it's, 'cause truckload contracts have always
Speaker:historically been very strange.
Speaker:Right?
Speaker:They're binding in price, but they're not binding in guaranteed volume that
Speaker:the shipper will provide or capacity that the carrier will provide.
Speaker:That's why it's the only commodity that I know of where breaching
Speaker:the contract is actually a KPI.
Speaker:Right.
Speaker:A carrier acceptance ratio.
Speaker:It's kind of weird and, and most shippers don't even track the yield.
Speaker:In other words, they said in the bid, oh, it's, it's five loads
Speaker:a week, when in fact it ends up some weeks, one, some weeks, 20.
Speaker:The carriers are very cognizant of that.
Speaker:They manage that, but the binding, the commitment very few contracts commit
Speaker:the shipper to provide volume and commit the carrier to handle every single load.
Speaker:Because then the price to do that, the level of co cost to due to
Speaker:minimize that risk would be too high.
Speaker:So there's always a little give and take on a contract.
Speaker:And what I've seen is most shippers will do a 26, like
Speaker:every other week kind of thing.
Speaker:A load.
Speaker:They think that's sufficient for contract.
Speaker:If you talk to carriers, they'll say 50, they'll say at least a load a week.
Speaker:Right?
Speaker:And so in between that is something reasonable.
Speaker:That's the hotspot.
Speaker:Okay.
Speaker:My next question was, is there a metric, the, you know, you would
Speaker:recommend transportation teams are specifically paying attention to.
Speaker:Yeah.
Speaker:So they can always look at the metrics of their own operations, right.
Speaker:On time acceptance ratio, damage, all, all that kind of
Speaker:stuff that they have control of.
Speaker:But there are two metrics that we do at DAT that I think are worth looking at.
Speaker:One is the ship spot premium ratio and the other is the new rate differential.
Speaker:The spot premium ratio looks at all the data from the several hundred
Speaker:shippers data that we have, the billions of dollars of, of data that
Speaker:we have, and we look at how the spot rate is compared to the contract rate.
Speaker:If that number is positive, then that means spot is higher than contract,
Speaker:where we're in a tighter market.
Speaker:If it's negative then that means we're in, in a, in a softer market.
Speaker:And what we've seen is the spot premium ratio has been
Speaker:negative for the last 36 months.
Speaker:And, and you know, during the pandemic it was super high, right?
Speaker:'Cause spot was way out, out, outpacing contract.
Speaker:It's now cresting again and it flipped positive about two months ago.
Speaker:And we weren't sure whether it was the holidays in December or
Speaker:whether it was the, the weather.
Speaker:But for whatever reason, spot premium ratio gives an indicator
Speaker:of how the market is trending.
Speaker:It flipped positive in end of December and stayed positive through,
Speaker:through into now early March.
Speaker:So spot premium ratio.
Speaker:The other one is new rate differential.
Speaker:And for that we look at the new rates coming in for contract and compare that
Speaker:to the old rates they're replacing.
Speaker:And so again, if that's positive, right, then that's telling me that new rates
Speaker:are coming in higher than the old rates.
Speaker:If it's negative, it's just the opposite.
Speaker:And we saw it in the last three, six months, new rate
Speaker:differential was negative.
Speaker:In other words, all the shippers were recouping some of those
Speaker:costs that they were paying out.
Speaker:During the pandemic.
Speaker:That's flipped, and the new rate differential has been positive
Speaker:now for the last couple months.
Speaker:And that tells me what new contract rates are doing.
Speaker:The market is tightening.
Speaker:And this is the indicator that shippers will use to say, should I give back
Speaker:some money on my RFP or should I ratchet it down and try to save every penny?
Speaker:This kind of tells you what you're probably gonna expect.
Speaker:And again, the new rate differential is an average, so you're gonna have
Speaker:some lanes if you're in a bid where you're gonna save a boatload of money.
Speaker:And you're gonna lose some money or have to pay a little more.
Speaker:It's all because the underlying network economics keep changing.
Speaker:So, do we anticipate that we're gonna keep seeing these positive differentials?
Speaker:I the market is tightening, so, yes.
Speaker:I, I, my estimates have been that the for drive in, it's gonna increase about
Speaker:10% year over year over the course of 26.
Speaker:Spot a little more than that, but contracts gonna start increasing too.
Speaker:Now, this might change even more.
Speaker:Let's see how the fuel situation goes.
Speaker:Is this a blip for this or is that gonna continue?
Speaker:'Cause again, that's, that will definitely drive the cost up.
Speaker:And the other thing it will do will reduce the, the carrier base because
Speaker:the smaller carriers, especially those operating spot, can't operate long.
Speaker:'Cause you think about it, they're paying for their fuel now and they get paid for
Speaker:some surcharge 30, 60, 90 days later.
Speaker:So it becomes a cash flow issue.
Speaker:So that means they're gonna do more factoring, which means they make lower
Speaker:margins, which is gonna drive some of those carriers at the edge outta business.
Speaker:So higher price fuel has a disproportionate impact on smaller
Speaker:carriers than larger carriers.
Speaker:In fact, if you're a large carrier with really efficient equipment and most of
Speaker:your business is on a fuel surcharge program, you actually can make money off
Speaker:your fuel surcharge program because if the fuel surcharge program assumes six
Speaker:miles per gallon fuel efficiency, and you're at seven, then that differential,
Speaker:you're actually on the, on the good side of the fuel surcharge program.
Speaker:Okay.
Speaker:So everybody should be kind of keeping a close eye on your smaller carriers.
Speaker:Absolutely.
Speaker:So for rising prices in, in gas.
Speaker:That's huge tip there.
Speaker:One final question, which is, so a common kind of question.
Speaker:Is there something, if you were gonna recommend doing something
Speaker:or making a change, are there things that make the fastest
Speaker:improvement, the best, ROI, you know.
Speaker:How can I get money fastest or, or see success fastest I should say.
Speaker:For, from a shipper's perspective?
Speaker:Yeah, from a shipper's perspective.
Speaker:I think the real concern is locking up your capacity and
Speaker:being ready to weather the storm.
Speaker:'Cause more tariffs are coming.
Speaker:We're seeing the, you know, there's a lot of uncertainty right now.
Speaker:There, there's been a lot, but it's, it's increasing now and the market's tighter.
Speaker:As you get to equilibrium, the slightest change could have a big impact.
Speaker:When you have a lot of like last, go back 24 months, big impacts, you know, big
Speaker:changes wouldn't have much of an impact.
Speaker:There's so much excess capacity out there.
Speaker:It's tighter now.
Speaker:So little things can have big ripple effects.
Speaker:So I think the big concern now is not Saving every dime.
Speaker:It's more about, okay, will my carriers be there when the market gets
Speaker:tighter or if my demand shifts or if you know the fuel price increases.
Speaker:So I think it's more keeping your capacity secure, more than
Speaker:saving, doing anything for a penny.
Speaker:Hmm.
Speaker:Okay.
Speaker:And I have one final question.
Speaker:This one's just for me.
Speaker:I recently read an article that said that shippers are worried more, are worried
Speaker:less about speed than they once were.
Speaker:And, and are worried more about reliability and cost.
Speaker:Are you seeing that this is simply, I I was curious to hear what you thought.
Speaker:'Cause I read that, I think it was a article.
Speaker:Yeah, I think I, I, I think I saw that article.
Speaker:It's more about you know, everyone's saying that the way that Amazon's been
Speaker:conditioning us, you know, same week, same day, next day, now it's same day.
Speaker:I think it depends on the item that you're looking for.
Speaker:And so it's very dependent on the commodity and the industry.
Speaker:Speed still matters a lot in retail, right?
Speaker:For that and especially for higher value items speed's not as important
Speaker:for lower value things, right?
Speaker:It's a time value of money.
Speaker:And so I think it really depends on the industry you're in and that
Speaker:the things that you're shipping.
Speaker:But yeah, I think generally consumers, I think the article I
Speaker:read are willing to accept slower.
Speaker:We did a study up here at MIT that looked at seeing if, how willing consumers
Speaker:would be to have slower delivery, knowing that it would save a certain number
Speaker:of trees better for the environment.
Speaker:We found that they actually would be willing to do that.
Speaker:It's the green button experiment that we did up here.
Speaker:My colleague Dr. Velazquez, and so they found that some consumers are willing
Speaker:to accept lower, not just for lower cost but actually for, for other reasons.
Speaker:And so maybe there is a more, we're not as hung up on getting something the same day.
Speaker:I don't know.
Speaker:We'll see how that pans out.
Speaker:Yeah, that's really interesting.
Speaker:And I would just say for everyone, it's just nuanced.
Speaker:What is your industry?
Speaker:What are you shipping?
Speaker:Whatever, you know, who are your customers?
Speaker:Make some, do some tests and see.
Speaker:Like, like Chris said, maybe people would be willing to take it longer for
Speaker:saving a tree or for anything else.
Speaker:Yeah.
Speaker:Always test.
Speaker:Okay.
Speaker:We are so out of time, Chris, but do you have any final thoughts or advice
Speaker:for everyone hanging in there in this kind of crazy time of transportation
Speaker:and supply chain out there?
Speaker:I just get to know your carriers I think we're seeing a little bit
Speaker:of a shift, you know, the between brokerage asset and non-asset, you
Speaker:probably wanna shift a little more to more asset based at this point.
Speaker:Just because they have more stability.
Speaker:They, they have assets that they can actually move.
Speaker:But don't go a hundred percent.
Speaker:So my big advice for you is to make sure you have the right balance in your
Speaker:portfolio of your carriers, that you have your transportation providers.
Speaker:Fantastic.
Speaker:And if they wanna get ahold of you or if they're interested
Speaker:in DAT, what, what can they do?
Speaker:They can reach out to me directly at my email caplice@mit.edu
Speaker:or chris.caplice@dat.com.
Speaker:Either way.
Speaker:Awesome.
Speaker:Great insight.
Speaker:Lots of benchmarks and data and all that good data that leads to
Speaker:good decisions we talked about.
Speaker:So.
Speaker:Alright, great talking with you, Lori.
Speaker:And we will see everyone next time.
Speaker:Take care.
