Mat: Welcome to the June edition of the C.H. Robinson Edge video.

This month, instead of walking through each mode individually, I want to focus on a theme that is becoming more important across the freight market. And that's the idea of secondary impacts. In today's environment, the primary impact is the headline, a tight truckload supply side market, U.S. regulations impacting U.S. carriers, and ocean blockades preventing ocean shipment transits. But this can often be just as impactful in the trickle-down effect.

So how those changes ripple into other modes, regions, and ultimately your transportation strategy are very important. So today I want to talk through a few examples of that across the domestic and global freight markets. Let's start off with truckload because it's still the foundation of most supply chains. And the primary impact here is clear. The market is experiencing significant capacity pressure and thus pricing has increased rapidly.

But the secondary story is what's happening as a result of that. The market is experiencing a shift of freight out of the truckload mode and into others, particularly in intermodal. Intermodal volumes are trending above historical averages, and that is being driven less by organic net new demand growth and more so by cost pressures in the truckload market. And when truckload becomes more expensive or even less predictable,

shippers start to look for alternatives. Right now, intermodal is a prime outlet for that. We are also seeing some early signs of impact flowing into the LTL networks. Some freight had previously been running via truckload or consolidation strategies, is now starting to move back into LTL, especially those shipments that sit in that middle range between partial and full truckload. This is still in the very early stages, so it's not showing up as a surge in overall demand.

but it is increasing tonnage in certain networks and tightening LTL capacity incrementally. So the takeaway here is that truckload tightening does not stay contained within the four walls of its own mode. It creates downstream pressure across intermodal, LTL, and the broader network. And that is what shippers need to plan for because this conversion ultimately leads to reduced capacity and increased rates in all of these modes.

So the second example is geopolitical disruption and its effect on global transportation, specifically the situation in the Strait of Hormuz. The initial primary impact is the prevention of ocean vessels navigating the region due to the naval blockade and military conflict. And to be fair, the secondary impact of oil and fuel prices has taken the spotlight since then, at least from a supply chain perspective.

And even though diesel prices have stabilized somewhat in recent weeks, the market is still operating with a structurally higher cost base and reduced inventory buffers, which keeps overall pressure elevated. If this were an isolated disruption, it would be a much easier pill to swallow. But this is in tandem with the aforementioned truckload line haul increases and the spillover into other modes makes it especially tough.

Not to mention that both line haul and fuel rates had been at relatively low levels before this year, so the magnitude of these increases just makes it feel so much worse. And at the same time, fuel is moving through the system in different ways depending on the mode. In LTL, fuel is typically applied as a surcharge, which means it can move faster than base pricing and it creates more immediate swings in total transportation costs.

In truckload, it's often treated as a pass-through, but there are still timing gaps and operational realities that impact carriers and flow into pricing decisions. A good example of that is that approximately 16% of truck miles driven are deadhead miles, meaning that the carrier has to pay for all of those fuel costs on their own. This continues the ripple effect into tightened carrier supply market that I discussed earlier.

But another knock-on impact of this geopolitical disruption is showing up in air freight. And at a high level, and no pun intended, air capacity remains available across many trade lanes. But operationally, the environment is becoming more constrained. Longer routings around restricted airspace, it's increasing flight times and reducing aircraft utilization. And that is narrowing flexibility and making shipment timing less predictable.

even if capacity appears available on paper. So the shift here is important. The constraint is not showing up as an obvious shortage of space. It's showing up as reduced flexibility, fewer recovery options, and longer booking windows. And that's changing how shippers are utilizing air freight. And we're seeing the air become more tactical and selective with a stronger focus on the high sensitivity or high priority shipments.

And that means that the secondary impact is not just cost, it's the risk and timing of the liability, which can be just as, if not more important, depending on that supply chain. Okay, the final example is regarding U.S. regulations. The primary story here is how this is impacting U.S. carrier capacity at stricter driver requirements and enforcement reduces that overall driver pool.

But the secondary impact is what's happening to cross-border freight, particularly in the Mexico to U.S. lanes. And recently, there has been a pronounced contraction in cross-border driver availability caused by the intensified U.S. enforcement of B-1 visa rules, English language requirements, and rules restricting Mexican carriers from transporting goods within the United States.

Thousands of drivers across key border regions have reportedly been taken out of action in recent weeks. Other drivers are reluctant to accept cross-border loads or even enter into the United States, opting to avoid the risk of inspection or visa revocation by only carrying intra-Mexico freight. This behavioral shift further reduced capacity and suggests that the disruption may be structural in nature rather than temporary.

Meanwhile, exports out of Mexico have been strong with one of the largest industries, automotive, increasing trade to the U.S. by nearly 6%. And this increase in demand coupled with that decreased capacity has led to freight backlogs at the border. And keep in mind that this is all happening with the deadline of July 1st looming for the USMCA review, which is something that should definitely be watched very closely. So

When you take a step back and you look at all of these examples together, there is a consistent theme. The headline is impactful, but not isolated to just those stories. We call them supply chains for a reason, because everything is interconnected with a chain reaction that goes on much deeper than what I had time to discuss today.

Truckload impacts intermodal and LTL. Geopolitics impacts routing, timing, modal availability and fuel. And regulations, they impact capacity flows within other countries. And for shippers, the implication is pretty straightforward. Managing transportation today is not about securing capacity or mitigating rates in a silo. It's about understanding how variables and decisions in one point of your network will affect performance elsewhere.

That means building more flexibility into your strategy and evaluating modal options more proactively. And it also means planning for how these secondary impacts may evolve, not just reacting to the primary headline. Well, that's all the time for today. As always, partner with your account team to pressure test your assumptions and stay ahead of these market disruptions. As C.H. Robinson brings you the edge you need to successfully manage your transportation strategy.

Thanks for watching, and I'll see you next month.

This month, instead of walking through each mode individually, I want to focus on a theme that is becoming more important across the freight market. And that's the idea of secondary impacts. In today's environment, the primary impact is the headline, a tight truckload supply side market, U.S. regulations impacting U.S. carriers, and ocean blockades preventing ocean shipment transits. But this can often be just as impactful in the trickle-down effect.

So how those changes ripple into other modes, regions, and ultimately your transportation strategy are very important. So today I want to talk through a few examples of that across the domestic and global freight markets. Let's start off with truckload because it's still the foundation of most supply chains. And the primary impact here is clear. The market is experiencing significant capacity pressure and thus pricing has increased rapidly.

But the secondary story is what's happening as a result of that. The market is experiencing a shift of freight out of the truckload mode and into others, particularly in intermodal. Intermodal volumes are trending above historical averages, and that is being driven less by organic net new demand growth and more so by cost pressures in the truckload market. And when truckload becomes more expensive or even less predictable,

shippers start to look for alternatives. Right now, intermodal is a prime outlet for that. We are also seeing some early signs of impact flowing into the LTL networks. Some freight had previously been running via truckload or consolidation strategies, is now starting to move back into LTL, especially those shipments that sit in that middle range between partial and full truckload. This is still in the very early stages, so it's not showing up as a surge in overall demand.

but it is increasing tonnage in certain networks and tightening LTL capacity incrementally. So the takeaway here is that truckload tightening does not stay contained within the four walls of its own mode. It creates downstream pressure across intermodal, LTL, and the broader network. And that is what shippers need to plan for because this conversion ultimately leads to reduced capacity and increased rates in all of these modes.

So the second example is geopolitical disruption and its effect on global transportation, specifically the situation in the Strait of Hormuz. The initial primary impact is the prevention of ocean vessels navigating the region due to the naval blockade and military conflict. And to be fair, the secondary impact of oil and fuel prices has taken the spotlight since then, at least from a supply chain perspective.

And even though diesel prices have stabilized somewhat in recent weeks, the market is still operating with a structurally higher cost base and reduced inventory buffers, which keeps overall pressure elevated. If this were an isolated disruption, it would be a much easier pill to swallow. But this is in tandem with the aforementioned truckload line haul increases and the spillover into other modes makes it especially tough.

Not to mention that both line haul and fuel rates had been at relatively low levels before this year, so the magnitude of these increases just makes it feel so much worse. And at the same time, fuel is moving through the system in different ways depending on the mode. In LTL, fuel is typically applied as a surcharge, which means it can move faster than base pricing and it creates more immediate swings in total transportation costs.

In truckload, it's often treated as a pass-through, but there are still timing gaps and operational realities that impact carriers and flow into pricing decisions. A good example of that is that approximately 16% of truck miles driven are deadhead miles, meaning that the carrier has to pay for all of those fuel costs on their own. This continues the ripple effect into tightened carrier supply market that I discussed earlier.

But another knock-on impact of this geopolitical disruption is showing up in air freight. And at a high level, and no pun intended, air capacity remains available across many trade lanes. But operationally, the environment is becoming more constrained. Longer routings around restricted airspace, it's increasing flight times and reducing aircraft utilization. And that is narrowing flexibility and making shipment timing less predictable.

even if capacity appears available on paper. So the shift here is important. The constraint is not showing up as an obvious shortage of space. It's showing up as reduced flexibility, fewer recovery options, and longer booking windows. And that's changing how shippers are utilizing air freight. And we're seeing the air become more tactical and selective with a stronger focus on the high sensitivity or high priority shipments.

And that means that the secondary impact is not just cost, it's the risk and timing of the liability, which can be just as, if not more important, depending on that supply chain. Okay, the final example is regarding U.S. regulations. The primary story here is how this is impacting U.S. carrier capacity at stricter driver requirements and enforcement reduces that overall driver pool.

But the secondary impact is what's happening to cross-border freight, particularly in the Mexico to U.S. lanes. And recently, there has been a pronounced contraction in cross-border driver availability caused by the intensified U.S. enforcement of B-1 visa rules, English language requirements, and rules restricting Mexican carriers from transporting goods within the United States.

Thousands of drivers across key border regions have reportedly been taken out of action in recent weeks. Other drivers are reluctant to accept cross-border loads or even enter into the United States, opting to avoid the risk of inspection or visa revocation by only carrying intra-Mexico freight. This behavioral shift further reduced capacity and suggests that the disruption may be structural in nature rather than temporary.

Meanwhile, exports out of Mexico have been strong with one of the largest industries, automotive, increasing trade to the U.S. by nearly 6%. And this increase in demand coupled with that decreased capacity has led to freight backlogs at the border. And keep in mind that this is all happening with the deadline of July 1st looming for the USMCA review, which is something that should definitely be watched very closely. So

When you take a step back and you look at all of these examples together, there is a consistent theme. The headline is impactful, but not isolated to just those stories. We call them supply chains for a reason, because everything is interconnected with a chain reaction that goes on much deeper than what I had time to discuss today.

Truckload impacts intermodal and LTL. Geopolitics impacts routing, timing, modal availability and fuel. And regulations, they impact capacity flows within other countries. And for shippers, the implication is pretty straightforward. Managing transportation today is not about securing capacity or mitigating rates in a silo. It's about understanding how variables and decisions in one point of your network will affect performance elsewhere.

That means building more flexibility into your strategy and evaluating modal options more proactively. And it also means planning for how these secondary impacts may evolve, not just reacting to the primary headline. Well, that's all the time for today. As always, partner with your account team to pressure test your assumptions and stay ahead of these market disruptions. As C.H. Robinson brings you the edge you need to successfully manage your transportation strategy.

Thanks for watching, and I'll see you next month.