Changes in freight rates: Inflation impacts prices across modes

Experienced shipping and logistics organizations understand the sometimes volatile nature of freight rates. Depending on the mode of transportation, the cost of fuel, the overall rate of demand and an array of other factors, freight prices can change on a near-daily basis.

For those responsible for getting customers' items from point A to point B, it's imperative to be able to access information on current freight rates across transportation modes. This level of awareness and understanding can help logistics managers select the best options for their loads and ensure the most cost efficient and timeliest service for clients.

Let's take a closer look at current freight rates across the industry, how things are changing and what logistics managers need to keep an eye on heading into the next quarter.

Breaking down freight rates: Pricing across different modes

Not surprisingly, freight rates differ according to the chosen mode of transportation, with the most popular including LTL and FTL trucking, rail, air and water transportation.

Trucking

As Logistics Management pointed out in a recent report, trucking rates have been impacted by inflation this year, but are now showing signs of a slow-down. While FTL and LTL inflation reached peaks of 11.2 percent in July and 8.8 percent in June, respectively, these numbers decreased to 7.9 percent for FTL and 6.1 percent for LTL by September of this year.

At the same time, though, chances are good that rates will rise again come 2019. According to the current forecast, the trucking industry's annual average prices will increase by 9.9 percent through the end of this year and into next year.

Rail

While inflation within the trucking industry mostly tracked expert forecasts, the same cannot be said for rail transportation. This sector saw a 17 percent increase in intermodal rail prices in September 2018 compared to the same time last year. While rail freight rates have been on the rise since 2016, experts noted that 2019 may provide a bit of relief, with only a 3.1 percent increase expected in 2019.

For logistics managers, this means that rail transportation might deserve a little more consideration next year, particularly for clients that are highly concerned with freight rate savings.

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air

Despite reaching a 10 percent peak inflation rate for air freight rates in May of this year, industry experts expect inflation rates to slow within this sector. Overall transaction prices fell 1.3 percent in September of this year compared to 2017, and forecasts show only a modest increase of 2 percent for price increases in 2019.

water

Water transportation rates were particularly unpredictable this year, experiencing a 5.5 percent increase in inflation in June 2017, and then rising to 9.2 percent in September. Thankfully, forecasts predict a 0.4 percent decrease in inflation rates for this mode of transportation in 2019.

What this means for logistics management

While remaining on top of changing freight rates can present a challenge, it doesn't have to be difficult. An intelligent transportation management system can enable users to compare rates according to different carriers and modes, providing the best visibility into current industry prices. Thanks to these and other key benefits, demand for TMS solutions is on the rise, and the global market for this technology will experience annual growth of more than 11 percent through 2024.

To find out more, connect with our FreightPOP experts today.