Intermodal vs. Transloading for Port Freight: A Guide
Are you dealing with overflow freight issues?
Major parcel shippers FedEx and UPS have been reporting daily volumes at or above peak holiday levels already, and volume increases can only be expected to continue as the actual holiday season approaches.
In this blog post, we'll explore the capacity concerns, rising costs, and massive backups caused by overflow freight, and what you can do about it.
Capacity concerns
As a result of this dramatic increase in volume, capacity concerns have become apparent across the industry. In some cases, high-volume shippers have been asked by carriers to scale back, with daily capacity limits put in place, and service guarantees suspended.
With the vast majority of retail sales now online, the surge in B2C volume has been significant for carriers. The additional stress placed on shipping networks as a result of this increase can cause delivery delays, customer complaints, and general slowdowns. In many cases, placing capacity limits is the simplest solution to get ahead of the issue, especially as the holiday season approaches. As you face these capacity limits, you have a few options. One is to divert overflow volume to alternative carriers.
This can, of course, lead to cost increases, but as this overflow volume isn’t likely to be permanent, it’s a viable solution.
Additional options include:
- Freight consolidation
- Utilizing NVOs (Non-vessel operating common carriers) who specialize in less-than-container load shipment handling
- Tapping USPS and DHL as alternatives to FedEx and UPS
In fact, NVOs have seen a considerable increase in market share, thanks to the overflow routinely being booked with them, in order for shippers to avoid high spot-rates when carriers hit volume caps.
Another option is to look at non-traditional pickup times. Some carriers have available capacity on weekends, rather than on weekdays. For example, as a traditional week of work is accumulated and orders processed, there may be an accumulation of overflow moved to a trailer or trailers that are then scheduled for pickup on the weekend, allowing for the traditional work-week start on Monday to get “caught up.”
Costs are rising
Costs are up across the industry thanks to volume flood and so some shippers are attempting to renegotiate pricing and volume caps to alleviate overflow pressures. The companies that primarily deal with B2B freight are at an advantage here, as carriers prioritize business that is more profitable for them.
Traditionally, the profit margins are much higher for B2B over B2C volumes. This has led to rising rates to offset the costs associated with the needed safety precautions.
Overflow freight is causing massive backups
In addition to the overflow of shipment volumes in the e-commerce realm, the global impacts have also caused a backup in shipping hubs and ports as large-volume international freight has accumulated. Slowdowns have been caused by:
- Shutdowns
- Limited workers available to process shipments
- Limited customs agents
- Lack of available storage
These factors have led to some potential issues.
Some available locations for overflow cargo when warehouses are full could face security risks, with theft of goods being a prominent concern. While theft of goods presents a significant issue, there is also the potential for the build-up of potentially hazardous cargo as well.
However, freight-forwarders have been working overtime to alleviate some of this congestion, and while there are still issues getting cargo and goods to and from docks in ports that are struggling with higher volumes, many freight-forwarders report that operations are running fairly smoothly.
Final Thoughts
As the industry adjusts to the restrictions and volume increases, it’s reasonable to expect that systems will be put in place to better manage the overflows. While restrictions begin to ease up in some regions, and additional staff is hired to respond to the dramatic volume in e-commerce.
Price increases, while perhaps temporary, may stick around to reflect these additional costs for carriers, and you should adjust your budgets accordingly. Reach out to learn how Redwood's Open 4PL approach can help you keep your costs down.
FAQs
What is overflow freight?
Overflow freight is the shipment volume that exceeds a carrier’s normal capacity during periods of demand spikes, like holiday surges or pandemic-driven e-commerce growth. When networks get crowded, shippers may need to route extra volume to alternative carriers, consolidate freight, or adjust pickup timing to keep shipments moving without relying on one overloaded network.
Why do carriers put capacity limits on overflow freight?
Carriers put capacity limits on overflow freight when volume rises faster than their networks can handle it. Limits help prevent delays, service failures, and operational slowdowns, especially when shipping demand spikes across both B2B and B2C channels. In the article’s context, these limits also help carriers manage higher surcharges and reduced service guarantees during peak strain.
How can shippers handle overflow freight when FedEx and UPS hit volume caps?
Shippers can handle overflow freight by diverting volume to alternative carriers, using freight consolidation, working with NVOs that specialize in less-than-container load shipments, or tapping USPS and DHL for certain moves. Some shippers also use weekend pickups, since carriers may have available capacity outside traditional weekday peaks.
Why are overflow freight shipping costs rising?
Overflow freight costs are rising because carriers are dealing with a surge in volume, added COVID-19 safety expenses, overtime for drivers, and tighter capacity. The article also notes that B2B freight is often more profitable than B2C, which can influence how carriers prioritize freight and price available space during periods of heavy demand.
What is the best way to reduce overflow freight costs?
The best way to reduce overflow freight costs is to renegotiate pricing and volume caps where possible, then spread shipments across carriers and service options instead of relying on one network. Freight consolidation and non-traditional pickup times can also help lower pressure on peak-day capacity, which may reduce the need to buy expensive spot space.
How do port and warehouse backups affect overflow freight?
Port and warehouse backups make overflow freight harder to move because shipments can pile up when there are shutdowns, fewer workers, limited customs agents, or not enough storage space. These bottlenecks can slow cargo movement from docks and create added risks, including theft and the buildup of hazardous goods when overflow storage is not well managed.
What role do freight forwarders play in managing overflow freight?
Freight forwarders help manage overflow freight by easing congestion and coordinating cargo movement when hubs and ports are overloaded. In the article’s example, forwarders were working overtime to reduce strain on docks and keep operations moving, even though delays and congestion were still affecting some international freight lanes.
