By Mark Montague, DAT Solutions
Did you make it through Winter Storm Blanche? Or Caly? Are you ready for Gregory? How about Niko, Pluto, or Yuri?
A bad storm by any name will whip up uncertainty in the supply chain. When the weather outside is frightful, delays and cancellations and higher transportation costs typically follow.
While you can't predict the weather, you can be prepared for inevitable trends when extreme conditions are in the forecast. If you move goods by truck, rates tend to respond to weather in three stages:
Stage 1: Outbound rates rise before a storm. If you're a shipper and you know a storm is coming, you want to move your freight out of the area before it hits and you'll pay a premium. If you're a trucker, this is a great opportunity to use the spot truckload freight market to find high-paying loads. Before you accept that freight, though, check to be sure that you won't get stuck at your destination—either because of snow or because of a lack of loads for the return trip.
Stage 2: Rates freeze, as trucks stay put. A lot of truckers park their drivers and equipment during a big weather event. With short-term events like hurricanes, this standstill lasts for a day or two. Trucks don't move much and neither do rates. Persistent cold and snow can have crippling effects for weeks. Think back to early 2014, when there were winter storm warnings in 18 U.S. states at once. The storms kept coming, hitting big swaths of the Midwest and the East Coast over and over again. Rates, of course, kept rising.
Stage 3: Inbound traffic re-starts, and rates heat up. When the roads are clear again, freight starts moving into areas that were hit by the storm. Shippers want to replenish inventories, and some communities will need relief supplies because of power outages or other challenges.
These steps are always more complicated when storms come during the last-minute rush of the holiday freight season. Even though all
merchandise for brick-and-mortar stores has been on the shelves since before Thanksgiving, lots of e-commerce orders are still on the move.
FedEx anticipates another record peak holiday shipping season, with each of the four Mondays during the season expected to be among the busiest in the company's history. Spot van rates were up significantly on lanes out of Denver (averaging $1.38 a mile during the week ending Dec. 10, up 10 cents) and other hubs for parcel freight while the biggest freight markets—Chicago, Atlanta, and Dallas, for example—were relatively quiet.
As Yogi Berra once said, "It's tough to make predictions, especially about the future." Even winter is far less dependable these days: the period from December 2015 to February 2016 was the warmest in 121 years of weather records in the Lower 48, according to NOAA's National Centers for Environmental Information. Thirty-six states had one of their top 10 warmest winters, and at least 14 cities with a period-of-record of at least 60 years had their record warmest winter last season.
But you know a cold wind is gonna blow at some point, and a bad storm will create opportunities for truckers who can maneuver safely and reliably in—or around—tough weather conditions and help shippers move their freight.
Mark Montague is industry rate analyst for DAT Solutions, which operates the DAT® network of load boards and RateView rate-analysis tool. He has applied his expertise to logistics, rates, and routing for more than 30 years. Mark is based in Portland, Ore. For information, visit www.dat.com.