Last year was one for the books. Will 2023 be the same? In 2022, fuel prices drove up
operational costs while shipping rates plummeted after hitting all-time highs during the pandemic. While most shipping rates have slowed and leveled off in the last few months, the sting of those two trends and other issues have shippers nervously waiting to see how 2023 will play out. That includes those in charge of freight claims management. In this blog, we will examine three key issues — those declining shipping rates, the possibility of a recession, and continuing labor shortages — that can combine to make the industry unstable. Understanding these issues can help prepare shippers for countering the effects the problems might bring in 2023.
It has been a wild ride for shipping rates in the last three years. Rates on containers going from Asia to the East Coast and West Coast of the United States had stayed about the same until the pandemic hit and even dipped a little below the current average. But by the middle of 2021, the rates had skyrocketed to all-time highs on many routes. After numerous spikes, including one in the middle of last year, the prices have slowly started to drop back and, in some cases, are near the rates before COVID-19.
As the rates on most shipping lanes are seeing steady declines, the rates on most operational items needed in shipping have increased, particularly fuel prices. These two trends are creating a strain on many budgets and leaving carriers to try to do more with less while their profit margins are getting thinner. Tighter budgets mean less money to bring in new workers or acquire operational solutions that could increase efficiency at both the facility and technology levels. This increases the chances of damage or loss when the employees or facilities are overwhelmed.
It’s a word that people fear when they hear it, but “recession” is currently on the minds of many in shipping, particularly in freight claims management. Some predict that it will not be as severe if it does arrive, and its rebound will be quick. “We tend to think really bad things when we hear the word’ recession,’ but, in this case, what’s anticipated is a very shallow and very short recession expected in 2023,” said Steve Latin-Kasper, NTEA senior director of market data and research. “Hopefully, it’s the final part of the rebalancing act that we’ve been engaged in since the pandemic hit back in March 2020.”
But any form of a recession almost always brings a tightening of the belts. That can mean carriers might not be so eager to compensate shippers in freight claims cases. In addition, layoffs due to the recession are certainly possible and could lead to extended wait periods for freight claims processing. Therefore, shippers should expect increased difficulty in getting compensation for freight claims.
The continuing concern over a driver shortage in the trucking industry is adding to the worries of a possible recession. While the shortage may have eased a bit since the record high in 2021, there is still apprehension that the shortage of drivers will continue for years to come and perhaps increase over the next decade. A forecast by the American Trucking Associations’ Chief Economist Bob Costello predicts a 64,000-driver shortage in 2023 and a new record high of more than 82,000 in 2024. Shortage estimates by the ATA come from determining the difference between the number of active drivers in the industry and the optimal number based on freight demand.
While increased pay and more ad visibility have helped the trucking industry entice new drivers, there is still a significant shortage of drivers, especially in the long-haul category. That means the limited number of drivers out there will be under pressure to pick up more loads, which will, no doubt, have them working quicker than normal to finish one job and move on to the next. That creates an environment that can lead to distractions or shortcuts that put shipments in jeopardy of being damaged or lost.
But the driving profession isn’t the only shipping occupation dealing with a lack of qualified workers. A lack of warehouse workers has also put a greater strain on logistics facilities. In a 2022 survey by Instawork, 73% of businesses said they have problems attracting employees, up from 26% the year before. A lack of experienced workers can create the same problem as not enough drivers: employees can become swamped by the volume and rush, which leads to increased chances of shipments being damaged or lost, leading to freight claims.
Freight claims managers need to be proactive and be able to make strategic decisions to mitigate risks when it comes to freight claims. FreightClaims.com can help you with those concerns by providing tools and an expert and experienced staff. FreightClaims.com’s cloud-based freight claims management software platform lets you submit claims fast, keep track of your claims, and streamline communications. The best way to be prepared for the future is to have a partner that is on the cutting edge, so begin your 2023 journey with FreightClaims.com by visiting our website and requesting a demo today.
