After presenting to a group of restaurant chain and food service procurement and logistics professionals last week a couple of points stood out. Here’s the quick takeaway: Spot Rates have recovered, now it’s contract’s turn.
Spot Rates Have Recovered. Now it’s Contract’s Turn.
The chart above gave heartache to those in attendance. The pricing gap that existed between contract and spot markets for more than a year has quickly gone away during 2017. And recent post-hurricane activity has only accelerated the issue.
Food costs are roughly 1/3 of overall costs for them. Of that, transportation accounts for approximately 10%. That puts transportation in a relatively minor position as it relates to overall cost, but when you have spot rates up nearly 30%(!) they take notice.
Capacity / Regulations
In addition to the recent activity, the outlook for continued capacity constraints as we move into 2018 is starting to make a significant impression.
Over the last year, while posted loads have more than doubled, truck availability has seen a 1/3 reduction. This has put the Market Demand Index (MDI) at record levels – surpassing the high levels seen during the winter of 2014. And this was even prior to the hurricane impacts. It has only gotten tighter from there.