How will your mobility program be impacted by increased U.S. freight costs?

Over the past few years, household goods shipping in the United States has undergone some changes. Let's take a look at what has happened.

There's a new tariff in town?

While van lines have been able to publish their own tariffs since 2007, most had maintained the familiar structure of the 400N tariff. Individual van lines may have slightly altered underlying fees of this tariff, but the rates were generally maintained in this format.

On average, we saw little to no rate increases for many years as van lines competed for all our business, not just in relocation, but for consumer and commercial movement as well. With the culmination of years of increased inflation and cost of doing business, van lines are now in a position where their survival requires a rate increase.  

Part of the challenge for van lines is that U.S. domestic household goods shipments have continued to drop in size. Changing demographics in the workforce and global mobility cost management initiatives have had the impact of driving down the shipment sizes. 

Smaller shipments (less than 5,000 pounds) and micro shipments (under 1,000 pounds) have continued to grow as a percentage of overall volume and effectively managing these shipments is more costly to them. Most of the price increases target small shipments. The most significant hike is up to a 65% price increase for shipments weighing 3,400 pounds or less. On top of that, this new higher price offers clients no change in service and, in some cases, longer shipment transit times. 

Additionally, at the beginning of the year, before the announcement of increasing shipment costs, U.S. tax laws around relocation benefits changed making what was excludable with household goods shipments now taxable. Mobility programs were already trying to get their heads around what the additional costs would be for their company's relocation program before they heard about the van line increase.

On top of that, then new government regulations regarding hours of service and electronic logging have added further complexity to van lines’ shortage in drivers and qualified labor.  

Where do we go from here?

Vice President of Global Supply Chain at Plus, Tracey Gatlin explains:

"The full impact of these factors is unclear, but here is what we do know:

• Increased cost: We expect the cost to ship goods in the United States will increase an average of 3% to 30% in 2018. The smaller the shipment, the higher the increase.
• New van line-specific tariffs and discount rates: The 400N tariff as it has been understood in the past is going away. Van lines will set their own tariffs and pricing methodologies, resulting in increased pricing variability. In addition, we are aware of new and historically different “discount” programs that will be offered, and we anticipate no offering of frozen rates.
• Capped discount rates: In some cases, past discount rates will now be capped or disallowed.
• Peak summer months: Additional costs or surcharges may be applied by van lines to offset higher demand in the summer months.
• Transit times and delivery spreads: New electronic logging requirements and government regulations around driving hours will affect how long drivers can go before they are required to take a break or causing the truck to quite literally shut off.
• Small shipments: As shipments become increasingly smaller and more difficult to service, they pose a greater challenge for most van lines. The minimum weight for small shipments will change if they are accepted at all."

With that, Tracey and the global supply chain team went to work to design a small shipment solution for clients, whether moves were smaller or micro, no matter where they were going, and whether they were full-service or self-service. The options offered aim to improve service, reduce cost and shorten transit time!