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Calculating Full Truckload Freight Rates

Full truckload shipping rates are complex and difficult to calculate. Rates constantly fluctuate due to changing demand and capacity, and other variables – such as mileage and lead time – also factor into freight rates. Therefore, it is important for shipping coordinators to understand these variables – or to partner with a knowledgeable 3PL like Red Kite Freight Solutions who does – so they can make informed, cost-effective shipping decisions. Here are some of the key factors used to calculate truckload freight rates that all shippers should know.

Mileage

Long-distance deliveries require more time and resources than short-distance deliveries, so carriers charge more for high-mileage deliveries. Long-distance trucking services typically start at 500 miles and above, so shippers can expect to pay a higher freight rate for a shipment across the country than a shipment to a neighboring city.

Diesel Fuel Price

To help cover fuel expenses, carriers typically include a fuel surcharge in their freight rates. Semi-trucks get anywhere from 4-8 MPG and can have a high per-mile fuel cost depending on diesel prices and distance traveled.

Let’s say, for example, a truck gets 6 MPG and diesel fuel costs $3.07. The average per-mile fuel cost ($3.07/6) for the carrier would be about $0.51. For a long-distance delivery of 500 miles, the carrier would pay $255 for fuel and likely pass along some of that expense to the shipper.

Fuel surcharges are based on the market price of diesel fuel and may fluctuate from week to week. As fuel prices go up, the surcharge will increase and as fuel prices drop, the surcharge will decrease. To track current national and regional diesel fuel prices, visit the U.S. Energy Information Administration website.

High-Volume Lane

Whether or not a shipper’s delivery is along a high-volume lane – a route regularly serviced by a carrier that typically includes major metropolitan areas – also impacts freight rates.

Carriers dedicate many trucks to servicing their high-volume lanes, giving them the resources to transport multiple truckloads at a given time. This keeps costs down for shippers booking a load along a high-volume lane. Capacity is tighter for shipments delivered outside a high-volume lane, as carriers tend to dedicate fewer trucks to servicing these areas. The smaller truck supply makes these shipments more competitive and expensive for shippers to book.

High-volume lanes also have a higher chance of offering the carrier a return load. If a driver delivers outside a high-volume lane and has a low chance of having a return load, the carrier may increase freight costs to offset the time and miles spent driving to the next load. 3PLs can help shippers find transit within a high-volume lane to increase the chance of a return load and lower costs. Red Kite, for example, specializes in finding return loads for both drivers within and outside of high-volume lanes.

Type of Truck

Market demand, capacity and operational fees are different for each type of trucking service, contributing to different freight rates for reefer, flatbed and dry van services. Reefer and flatbed transit, on average, tend to be more expensive than dry van services due to the driver expertise and resources needed to transport loads like building materials or food and beverage products.

Shipment Lead Time

Lead times are important when booking a load. When a shipper provides a carrier with longer lead times, it gives the carrier more time to find a driver to transport the load. When a shipper provides a carrier with a shorter lead time, however, capacity is tighter, and the carrier may have more difficulty finding a driver to deliver the load.

Freight rates increase when capacity is tighter, so booking a load with a shorter lead time means a shipper will pay a higher freight cost than they would if providing a carrier with longer lead times. Shippers who partner with 3PLs, however, may still be able to keep freight costs down with a short lead time. 3PLs like Red Kite have connections with a variety of carriers and can use their relationships to find good rates in tight capacity markets.

Weight and Load Size

Weight and load size are also factored into truckload freight rates. Oversized loads, for example – loads that exceed a road or highway’s size and/or weight limit – require permits, experienced drivers and other resources. Carriers charge higher freight rates for oversized loads to cover the additional expenses associated with hauling them.

Any load that exceeds a road or highway’s size and/or weight limits is considered an oversized load. As a rule, loads over 46,000 lbs, wider than 8 ft. 6 in. or taller than 13 ft. 6 in. are considered oversized. Heavy equipment, like bulldozers or forklifts, is an example of a good that typically falls in the oversized load category.

Extra Services

Loads or deliveries that need specific actions or attention from a carrier – such as a delivery within a tight timeframe or a delivery of fragile goods – tend to require more time and resources. Carriers may charge a higher freight rate for the extra time and resources necessary to fulfill a shipper’s unique shipping needs.

Loads delivered to difficult receiving locations, including places without a loading dock, limited hours or congested loading docks, are more challenging and time consuming for drivers. As a result, carriers will usually charge shippers more for freight delivered to a difficult receiving location.

Market Conditions and Other Factors

Baseline freight rates are set based on market conditions and rise and fall as demand and capacity change. Higher demand and tighter capacity typically cause increases in freight rates, while lower demand and looser capacity lead to softening rates.

Economic conditions and manufacturing activity are some of the market factors that influence freight demand and capacity. When manufacturing activity is high and economic conditions are favorable, shipping activity tends to increase and as a result, freight rates are usually higher in a growing market. When manufacturing activity and the economy slow, so does shipping activity, and freight rates will decrease.

Red Kite publishes a monthly newsletter for customers that highlights shipping conditions, fuel costs and trucking outlooks to keep shippers informed about trends that could impact freight rates and capacity. Sign up to receive today!

Other outside factors that can impact freight rates include:

  • Season: Some industries that use truck freight are season-oriented. For example, the agriculture industry tends to be active during summer, causing an increase in freight demand for agricultural goods. Because these goods are shipped on dry vans or reefers, capacity for these services tends to be tighter in the summer, leading to increased freight rates.
  • Region: Trucking demand and capacity is different for each region of the U.S., leading to varying rates across the country. If capacity is tighter for flatbeds in the Midwest than it is in the South, for example, flatbed freight rates will be higher in the Midwest.
  • Severe weather: Severe weather events like hurricanes or snowstorms can impact a carrier’s ability to deliver loads and tighten capacity, causing a temporary rate spike.
  • Receiver rejecting orders: If a shipper sends a carrier to the wrong address or a receiving location that is closed, the carrier will have to return the freight to the shipper or to another facility. These shipping errors result in lost time and miles for drivers, and carriers will likely charge shippers for the wasted resources.

Finding the Best Freight Rate for Your Load

It can be difficult for shipping coordinators to find the best freight rate for their load, especially when their shipment requires a tight delivery frame or another specialized service. Partnering with a 3PL, however, can allow shippers to lower their freight costs. 3PLs have strong relationships with various carriers, which gives them the ability to negotiate freight rates to ensure their customers receive a competitive rate.

With a strong carrier network, Red Kite Freight Solutions can find a solution for your shipping needs, no matter how complex, at a fair, competitive rate. Our experienced team is committed to finding the most strategic and beneficial freight solution for each customer because when you thrive, we thrive.

Contact Red Kite or request a quote today to get a competitive rate for your full truckload freight needs.

Trucking Industry Trends to Watch in 2020

As 2020 begins, shippers and carriers will keep a close eye on market conditions to gauge this year’s trucking outlook.

The Red Kite team regularly watches industry trends to ensure our customers get fair, competitive rates based on current market conditions. Here are a few trends our team will closely watch that could shape trucking in 2020.

Manufacturing Activity

2019’s Manufacturing Activity

In 2019, manufacturing activity softened amid trade tensions, slowing business confidence and economic uncertainty. We saw the IHS Markit US Manufacturing PMI drop to 52.4 in December of 2019 from 54.9 in January of 2019. In the second half of 2019, we watched manufacturing PMI begin to edge upwards as business expectations for 2020 improved, primarily due to favorable financial conditions and easing trade tensions.

 

2020 Manufacturing Outlook

According to a report published by the Institute for Supply Management (ISM), we can expect manufacturing activity to increase in 2020. Purchasing and supply executives in the manufacturing sector predict that revenue will be higher this year and are optimistic that manufacturing activity will be stronger in the first half of 2020 than it was in the last half of 2019. Executives also believe overall business prospects will increase this year.

The manufacturing sector is important for us to watch because trucks regularly ship loads used in a variety of manufacturing applications; the level of manufacturing activity can have a major impact on overall freight volume and demand.

Trade Tensions & Tariffs

We watched trade tensions between China and the U.S. escalate last year as new tariffs went into effect. At the end of 2019, President Trump announced that Phase 1 of a trade deal with China will be signed on Jan. 15. President Trump also stated he will travel to Beijing later this year to continue talks, indicating that we could be closer to seeing a final U.S.-China trade deal.

Tariffs and trade policies often influence manufacturing activity – trade tensions can put a pause on business investments and new orders. Because the manufacturing sector is so closely tied to truck volume, our team keeps a close eye on any policies and indicators that impact manufacturing activity.

Hours of Service (HOS) Rule Changes

In 2019, the Federal Motor Carrier Safety Administration (FMSCA) proposed a rule to modify five existing HOS rules. According to the FMSCA, we will see the rule changes allow drivers more flexibility in managing unexpected road conditions, such as traffic congestion, while maintaining current safety limits on driving time. The changes will also give drivers the ability to split their off-duty time and allow for more flexible breaks.

Proposed HOS Changes

Modifications What Would Change
30-Minute Break Rule Break requirement would be tied to 8 hours of driving time without an interruption of at least 30 minutes. Break can be taken by a driver using on-duty, but not driving, status.
Adverse Driving Conditions Exception Maximum window for permitted driving would be extended by 2 hours.
Off-Duty Break Off-duty break of at least 30 minutes, but no more than 3 hours, that pauses a truck driver’s 14-hour driving window would be allowed. Break would be allowed if a driver takes 10 consecutive off-duty hours at the end of their shift.
Short-Haul Exception Lengthen driver’s maximum on-duty period from 12 to 14 hours. Extend operating distance limit from 100 air miles to 150 air miles.
Sleeper-Berth Exception Drivers could split required 10 hours off-duty into either an 8 and 2 split or a 7 and 3 split, either in sleeper-berth of off-duty. Hours would not count against 14-hour driving window.

The FMSCA plans on enacting the rule modifications quickly, but experts believe we will not see the changes go into effect until later this year.

Trucking Indexes

FTR Shippers Conditions Index (SCI)

The SCI is one of the trucking condition indexes the Red Kite team closely follows. SCI provides insight into market conditions for shippers and measures favorability based on freight demand, freight rates, fleet capacity and fuel price.

Shippers conditions were favorable throughout last year, largely due to lower freight rates and demand. FTR’s projection shows we can expect shipper conditions to remain positive during the first half of this year, but conditions will slightly decrease due to firming carrier capacity utilization.

FTR Trucking Conditions Index (TCI)

Another index we closely follow is the TCI, which measures market favorability for carriers based on  freight volumes, freight rates, fleet capacity, fuel price and financing.

Trucking conditions were mostly unfavorable in 2019 as a softening manufacturing sector contributed to lower freight volume and demand. According to FTR’s projection, we will see a neutral TCI reading during the first half of this year.

Navigating the 2020 Market

Manufacturing activity, trade news and trucking regulations and indexes are just a few trends the Red Kite team will watch in 2020. It can be challenging to predict trucking conditions and outlooks, but following market and economic indicators helps give us an idea of how freight demand and rates could be impacted. By monitoring these key indicators, we hope to provide valuable insights to our customers and help them find the best transportation solution for their unique shipping needs.

Contact Red Kite or request a quote to see how our experienced team can help you navigate the 2020 shipping market.

Shipping Logistics: Full Truckload Vs. Less-Than-Truckload

Deciding whether to use full truckload or less-than-truckload (LTL) shipping is one of the many important decisions shipping coordinators make when coordinating freight. Freight size and weight may seem to be the main factor in choosing between full truckload and LTL services, but there are many key factors that play a role in the decision process. Here are some important factors shippers need to consider when determining if full truckload or LTL is the best shipping method for their load.

What Is Full Truckload and Less-Than-Truckload?

Before exploring the differences between full truckload and LTL shipping, here are definitions and key characteristics for each mode:

  • Less-than-truckload: Used for loads that are too large to mail, but too small to fill an entire truck. Multiple shippers share the space and cost of the truck.
  • Full truckload: Only goods and materials from one shipper are transported on the truck. Typically, shipments are larger than those of an LTL load and can fill up to an entire truckload.

Shipment Size

Mode Pallets Weight
Less-Than-Truckload 1-6 200-5,000 lbs
Full Truckload 24-30 5,000-42,000 lbs

Because LTL carriers are transporting a variety of loads from multiple shippers, each individual shipper’s load can only take up about 12 linear feet of a trailer. For example, if a shipper wanted to arrange LTL transit for standard-sized 40” by 48” pallets, they could fit up to six in the truck. Depending on the load size and material shipped, LTL shipments can range between 200 to 5,000 lbs in weight.

Full truckload shipments are more flexible with load size and can carry up to 42,000 lbs in weight. Full truckloads have capacity for about 24-30 standard-sized pallets, more than four times the number of pallets an LTL shipment can carry.

Fragility of Goods or Materials

As LTL loads are delivered at multiple destinations, an individual shipment will be loaded and unloaded several times – and may be placed on different trucks – before it reaches its final destination. This increased freight handling can put fragile goods at-risk for damages, especially if they are not properly packaged.

Full truckload shipments are only loaded at their origin point and unloaded when they reach their delivery location, which decreases the amount of freight handling necessary. The decreased freight handling helps to reduce the risk for damages to fragile goods and materials during their shipment.

Freight Cost

In addition to sharing truck space, shippers using LTL also share freight costs. This makes LTL shipping cheaper and more cost-effective for smaller shipments.

Shippers using full truckload services pay the freight cost for the entire truck, making it more cost-effective for larger loads. Shipping small loads using full truckloads is typically not cost-effective, as shippers would pay for truck space they are not using.

Time-Sensitivity

LTL carriers make delivery stops in multiple locations, which increases transit time for an individual shipment. The nature of LTL shipments can also make it more difficult for a shipment to be delivered on a specific date or within a narrow timeframe.

Full truckload carriers deliver shipments directly to their destination, meaning a shipment spends less time in transit. Unless a carrier encounters an unexpected delay, such as a road closure or winter weather, they are able to deliver a shipment within a narrow timeframe.

Type of Truck

Refrigerated vehicle (or reefer) transit is often difficult to coordinate for an LTL shipment – the multiple delivery stops and freight loading and unloading could put temperature-sensitive freight, such as food and beverage products, at-risk for spoilage or damage. Dry van transit, however, can easily be coordinated for LTL shipments because goods and materials do not have any temperature-specific needs that would be difficult to provide with high freight handling.

Full truckload shipments work well for both reefer and dry van transit. Because shipments are taken directly to their delivery destination, they can be kept at a consistent temperature in the trailer and carry less damage-risk due to fewer loading and unloading steps.

Partnering with a 3PL for Full Truckload or LTL Shipping Needs

Deciding whether full truckload or less-than-truckload shipping is the most efficient and cost-effective option for your supply chain can be challenging. Each service also comes with its own set of logistical challenges that can be time-consuming and take shippers away from other important tasks.

Partnering with a 3PL who can coordinate full truckload and LTL shipments offers many advantages to shippers, including:

  • A team of logistics experts who can help you decide between full truckload and less-than truckload shipping based on your unique shipping needs and who are equipped to coordinate challenging LTL shipments.
  • Lower freight costs for all services due to negotiating power with their strong network of carriers.
  • Trusted carries who operate in major manufacturing hubs across North America who can efficiently deliver both your LTL and full truckload shipments.

With decades of combined experience in logistics, Red Kite Freight Solutions can hunt for a solution for your unique shipping needs, whether it be full truckload or less-than-truckload shipping. We are champions for our customers and strive for your success because we believe that when you thrive, we thrive.

Contact Red Kite or request a quote to learn more about our full truckload and less-than-truckload freight solutions.

Trucking Industry Insights: November 2019

The trucking industry saw mixed conditions during the fall, and with winter on the way, shipments are expected to slow. Our main takeaway, based on economic news and indicators, points towards softening conditions for both carriers and shippers for the remainder of 2019. Here are the top metrics and headlines we are currently watching:

Industry Indicators

ATA Tonnage Index: 117.6 (September 2019)

After falling 4% in August, truck tonnage remained steady in September with a 0.2% increase. Overall, tonnage in the third quarter was up 4.5% from a year earlier.

Diesel Fuel Price: $3.073/gallon (week of 11/11/19)

The U.S. average retail price of diesel rose 1.1 cents the week of Nov. 11. However, diesel prices are down 24.4 cents from the same time a year ago.

FTR Trucking Conditions: -1.11 (August 2019)

Trucking conditions fell in August due to weak utilization and higher financing costs. Slowing manufacturing activity contributed to a decrease in conditions.

FTR Shippers Conditions: 6.4 (August 2019)

Shippers conditions increased in August after falling in July. Shippers conditions are predicted to soften in the upcoming months due to firmer freight rates.

Trucking Industry News

Trucking Employment Increases After A Quarter of Declines

According to the Department of Labor’s monthly employment report, the for-hire trucking industry added 1,300 payroll jobs in October. The increase in trucking jobs followed three straight months of declines in the trucking industry.

Carrier Closures Up in 2019, But Do Not Indicate Trend

640 carriers have closed as of September 2019, more than double the number of carriers who closed in the 2018 season. However, experts say the closures do not indicate a long-term trend, as 2018 had a lower-than-usual close rate due to tight shipping capacity.

Operational Trucking Costs Up

A study conducted by the American Transportation Research Institute (ATRI) found that the costs associated with trucking are increasing. Costs associated with fuel and driver compensation accounted for carriers’ biggest expenses. Industry experts say a softening economy will continue to keep trucking operational costs high.

How to Prepare for the Winter Shipping Season

With colder weather on the way, shippers are beginning to prepare for the winter shipping season. From icy roads to frigid temperatures, winter is full of supply chain challenges, but by planning and being proactive, you can make winter shipping less stressful. Here are some actions you can take to help your supply chain be successful this winter:

Regularly monitor weather conditions

Winter weather brings ice, snow and blizzards to much of North America. While weather is not always predictable, regularly monitoring forecasts and conditions can help you prepare for and plan around any weather-related delays your shipments could face. In addition to monitoring local conditions, keep an eye on weather nationwide – these weather conditions could impact supply chains across North America. If your freight is traveling a long distance, keep track of weather conditions along its route to prepare for any weather delays that could happen while it is in-transit.

Expect shipping delays and be proactive

When winter weather makes roadways dangerous, road closures, slowdowns and shipping delays are inevitable. Fast-changing weather quickly deteriorates road conditions as well. Additionally, the holiday season often increases road traffic around densely populated areas, slowing travel.

Be proactive when coordinating outbound shipments in winter by expecting delays. Plan to send your shipments early and allow more time for goods or materials to reach their destination, reducing the chance of missing a delivery deadline.

Protect temperature-sensitive cargo

Some goods and materials, such as food and beverages, pharmaceuticals and chemicals, are at-risk for freezing or becoming damaged when exposed to cold temperatures. Even when shipping goods or materials from a warm climate, you must consider whether your shipment will travel through a climate with cold temperatures.

Using a temperature-controlled truck can help prevent temperature-sensitive goods from freezing by keeping your freight at a consistent temperature. For freight traveling a shorter distance that is not as much at-risk for freezing, you can also place blankets or tarps around goods to protect them from cold temperatures and wind long enough to safely reach their destination.

Partner with a 3PL who can help you overcome winter shipping challenges

Between winter weather, delays and keeping freight safe, winter is a challenging shipping season. It can be difficult for logistics coordinators to plan around winter weather while finding a reliable, safe carrier to transport their goods or materials.

Partnering with a trusted third-party logistics company, however, can help you successfully navigate the stressful and difficult winter shipping season. Look for a 3PL with an experienced team and dependable network of carriers to help coordinate your freight shipments this winter.

Red Kite Freight Solutions can help you with your winter shipping needs. With decades of combined logistics experience, our team understands the challenges shippers face in the winter and will find the best transportation solution for your unique shipping needs, whether you need climate-controlled freight to protect your goods or time-sensitive deliveries. Red Kite also has a reliable network of carriers and will find an experienced carrier who can help your freight arrive safely at its destination.

Request a quote or contact Red Kite today to learn more about our winter transportation solutions.

How A 3PL Can Improve Your Supply Chain

Between trying to schedule time-sensitive deliveries and keep freight costs down, coordinating transportation for shipments can be challenging. To help navigate shipping difficulties and keep supply chains running smoothly, many businesses hire third-party logistics (3PL) companies.

3PLs coordinate and handle logistics for a business. Businesses go to 3PLs with their shipping needs and transportation method, which could be truck, rail or ship, depending on what the 3PL offers. Whether you are looking to streamline your supply chain or receive help with the shipping process, partnering with a 3PL offers many advantages, including the following:

Lower freight costs

Controlling freight costs is important to many businesses. The strong relationships 3PLs have with a network of carriers allow 3PLs to negotiate freight rates and ensure their customers receive fair, competitive rates.

More efficient use of time

Finding carriers can be time-consuming and take employees away from other important tasks. Working with a 3PL who takes care of finding a carrier and coordinating shipments allows employees to focus their efforts on other aspects of their business.

Streamlined supply chain

Businesses strive to make their supply chain more efficient, but it can be difficult to know where improvements can be made. 3PLs understand the unique shipping needs of each business they partner with, allowing them to make supply chain recommendations tailored to individual businesses.

Experienced teams

Some shipments, such as less-than-truckload (LTL) and just-in-time (JIT), can be particularly difficult to coordinate. Employees at 3PLs have years of experience in logistics and can coordinate time-sensitive shipments to ensure they arrive on-time at their destination.

When looking to partner with a 3PL, it is important to make sure the company is experienced and trustworthy. Red Kite Freight Solutions has a strong network of reliable carriers and a team with decades of combined experience. Red Kite founder Lacey Jackson has experience working on the shipper side, giving her insight into the challenges logistics teams face.

Unlike most 3PLs, Red Kite will not commit to a load we do not already have a truck for, reducing the chance for a service disruption in your shipment. Customer service is our top priority, and we will advocate to ensure you are getting the best rate.

Request a quote or contact Red Kite today to learn more about our transportation solutions.

Trucking Industry Insights: October 2019

The trucking industry saw mixed conditions over the past couple of months. Our main takeaway, based on economic news and indicators, points towards trucking conditions remaining stagnant over the next few months. Here are the top headlines we are currently watching.

Diesel Fuel Prices Increase

The national average for a gallon of on-highway diesel fuel jumped 9.4 cents the week of September 23rd, reaching $3.081 a gallon. Diesel fuel prices jumped due to recent attacks on a Saudi Arabian oil field that slowed the country’s oil production. The price increase is the largest single week change in average fuel prices since September 2017.

The Midwest saw the largest price spike, with an 11-cent increase, followed by a 9.7 cent-increase in the Lower Atlantic and Gulf Coast.

Source: Commercial Carrier Journal

August Truck Tonnage Rose 4.1%

Truck tonnage in August rose 4.1% compared to tonnage a year earlier, according to the American Trucking Association’s For-Hire Truck Tonnage Index. Seasonally adjusted tonnage also increased 4.3% year-to-date compared with the first eight months in 2018. However, truck tonnage fell 3.2% in August after an increase of 6.2% in July.

According to ATA Chief Economist, the rise in tonnage data is due to an increase in contract freight, as spot market freight experienced decreases this year.

Source: Transport Topics

FTR Trucking Conditions Index Slightly Improves in July

The FTR Trucking Conditions Index (TCI) slightly improved in July, with a reading of -0.28. According to FTR, a TCI reading above zero represents an adequate trucking environment – a reading above 10 indicates volumes, prices and margin are in good range for carriers.

July’s reading showed an improvement in trucking conditions compared to June’s reading of -0.82 and May’s reading of -2.3.

FTR said lower diesel prices improved trucking conditions in July but expects the outlook for conditions over the next year to range from neutral to negative.

Source: Logistics Management

A Note From Our Founder, Lacey Jackson

Dear Reader,

I am excited to announce the launch of Red Kite Freight Solutions, a third-party logistics company that specializes in finding truck transportation for a variety of loads, from raw materials to finished goods. We are committed to building strong relationships with employees, customers, vendors and carriers.

When I was logistics manager for Leeco® Steel, a steel plate supplier, the U.S. truck driver shortage grew to the highest level in 15 years. I noticed shippers struggled to find coverage for their freight deliveries, and as a result, supply chains faced significant delays. During this shortage, I thought of an efficiency model in which outbound loads for Leeco would be delivered near outbound loads for Leeco customers, which would allow carriers to cover both.

I founded Red Kite this year with the vision of using this efficiency model to serve all types of customers across North America. The name “Red Kite” comes from the red kite bird of prey – an adaptive, resilient bird that travels hundreds of miles for food, but always returns home. Like the bird, the Red Kite team puts family first and finds adaptive, creative ways to move freight efficiently for customers via our network of carriers, while also helping carriers find their next load.

I look forward to expanding the Red Kite family and would love the opportunity to work with you. If you have any questions about Red Kite or would like to learn more, please contact our team today.

Sincerely,

Lacey Jackson – Founder & Logistics Manager