The transportation industry is going through a volatile period, with various factors such as the economy, weather, foreign conflicts, and long-term supply chain issues all playing a role. The spot freight market can always be unpredictable but has been especially unstable recently. In this article, we’ll look at some factors that are affecting the freight industry along with some tips on preparing for future uncertainty.
Weather, Inflation, Fuel Costs and Other Issues Affecting the Freight Industry
Along with long-term supply chain issues and a period of rising inflation, the weather is having an effect on the spot freight market. The Atlantic hurricane season lasts from June to November and can have a significant impact on supply chains. Forecasters are predicting the likelihood of a more severe than average hurricane season in 2022.
In addition to hurricanes, above average snowfall and severe winter conditions are predicted for the East Coast, North East and Upper Midwest. Both the potential and reality of severe weather can significantly disrupt freight markets. In a year in which fuel prices and inflation are also spiraling, bad weather is still another factor that may affect prices and supplies of goods.
The inflation rate, currently at over 9%, also has an impact on the freight market. Some economists and other forecasters are predicting a recession, which could lead to declining demand for many products as people have less money to spend. In 2021 we saw a crazy spot freight market, therefore a lot of drivers got back into the field. Now we are seeing a cooling of the market. According to FTR (Freight Transportation Research Associates) total broker-posted dry van rates are about 63 cents below the record posted last year. And with the increase in diesel prices over the last four months, dry van rates are nearly $1 below the level they were last year. All of these factors require businesses in the freight and transportation industry to plan ahead.
How Companies Can Prepare For a Volatile Spot Freight Market
With so much uncertainty around the economy, weather, and international situation, the spot freight market is likely to remain volatile for the foreseeable future. Freight companies must be flexible and prepared for almost anything.
It’s best to be ready for continued high fuel prices and even a recession. If conditions improve, you’ll still be in a stronger position. However, if you prepare for the worst in your financial planning and budgeting, it will be easier to cope if there’s a downturn.
Research Ways You Can Expand or Pivot
In any economy, certain areas and industries are impacted more than others. You may be able to buffer your position by expanding into new markets.
Cut Costs and Improve Efficiency
If you have an accurate view of your cost-per-mile, you can look for adjustments to lower costs. Make sure you are using a fuel discount card and don’t overlook expenses such as various types of insurance, permits, and leasing space.
Improve Cash Flow and Reduce Risk with Non-recourse Factoring
Uncertainty in the marketplace can make cash flow unpredictable. The above tips can help with cash flow. Another strategy that can make a big difference is transportation factoring. When you factor your invoices, you get cash immediately from the factoring company freeing you from having to wait for clients to pay. During difficult times, this is especially valuable as cash-strapped clients may be late with payments. Even worse, if your freight broker becomes insolvent, factoring with a non-recourse factor will protect your business against bad debt.
Riviera Finance for Transportation Factoring
Riviera Finance has been serving the transportation industry since 1969. We provide flexible non-recourse factoring with many attractive features.
- Fast payments. Clients can get up to 95% of freight bills within 24 hours.
- 24/7 Credit checks and approvals on your brokers. This helps you make quick decisions on wait loads to book and assess the financial solidity of your clients.
- Credit guarantees on factored invoices. This protects you from the risk of not getting paid.
- Improve your financial situation without incurring new debt.
Transportation factoring can help you improve your cash flow no matter what’s happening in the freight industry and in the wider economy. To learn more about transportation factoring, contact Riviera Finance.
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