2009 Logistics Rate Outlook: Assessing the opportunity
Michael A. Levans, Group Editorial Director -- Logistics Management, 1/1/2009
Our annual rate outlook cover is designed to help start a discussion—hopefully right in your office. This year you’ll see our logistics executive looking down on a sea of open capacity across every mode. He appears comfortable, somewhat pensive, twirling his pencil between his fingertips on his right hand.
Now, place him into context under the headline “Window of opportunity” and it begs the question how he’ll go about taking advantage of the opportunity he sees before him. We don’t really know what kind of guy he is, and that’s where the discussion should begin. Is he a tough guy who likes to beat his carriers up on rates and capacity for short-term gain? Or is he a shipper who is looking beyond the next eight or nine months and is quietly strategizing how he can realize long-term benefits for himself and his carriers when he sits down to renegotiate his contracts?
Regardless of our shipper’s mindset and carrier philosophy, though, the current environment dictates that he needs to strike while the iron is hot. As our John Paul Quinn writes in the lead of our 2009 Logistics Rate Outlook (page 28), “Rather than a perfect storm, this represents a perfect break in the weather for shippers who have been battered for months by heavy fuel surcharges and uncertainty as to what modal alternatives to consider.”
With oil prices dropping dramatically from $150 to under $50 a barrel in six months and plenty of capacity to be had in every mode, just about every one of our top industry observers told Quinn that the first half of 2009 is the time when shippers need to turn this unique situation into their own cost-saving advantage. Get in there and negotiate, renegotiate, and renegotiate again, he writes. Not even the market’s most astute observers can tell us how long this window might be open, so perhaps our man is thinking he needs to get in there and fight for what he can get—and do it today.
But while our esteemed panel has reinforced this thinking, they also strongly suggest that shippers need to exercise extreme diplomacy, especially given how “dangerously uncertain” the transportation market has become. Our shipper may have seen some of his best small carriers shut down this past year. He may have pushed a little too hard on service levels and he could be taking the time to contemplate his tactics before he picks up the phone to call his carriers.
Before you pick up the phone I would highly suggest that you make John Gentle’s Sage Advice column (page 57) your second piece of required reading this month. Gentle is a passionate advocate for the “relationship management” approach to carrier negotiations and has decades of experience in partnering with carriers in a way that benefits both sides. His column this month is an eerie reminder that you can quickly find yourself on the flip side of what was once a golden opportunity.
Comments? E-mail me at michael.levans@reedbusiness.com
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