As we approach the busiest shipping months of the year, shippers around the country are seeing the cost of for-hire transportation rise to levels they have not seen in several years. They're also experiencing unprecedented difficulty in securing transportation services, particularly truckload services.

This situation came about largely due to developments that occurred during the first half of 2004, including:

• The first major revisions in many years of the federal regulations governing drivers' hours-of-service (HOS) rules
• Rapid escalation of both diesel and gasoline fuel prices
• The continuing critical shortage of truck drivers, particularly drivers of tractor-trailers
• Increases in driver pay in the truckload sector, not only for company employees but also for owner-operators
• Reduced capacity brought about by the sizeable number of truckload carriers, and to a lesser extent LTL carriers, that have gone out of business.

Let's take a closer look at what effect these factors are having on both pricing and service.

Freight rates are going up. Some carriers are in the process of implementing general rate increases. Most are sticking close to the level of increases they took last year—just under 6 percent on average. Some have chosen to implement their increases in June, about six weeks earlier than they did last year.

In the truckload sector, many carriers that are affected by the new HOS rules have been forced to boost drivers' pay just to keep compensation on par with last year's rates. Others have been forced to offer higher pay to attract new drivers or hold onto current ones. As a result, carriers have had to impose higher rate increases than they did in the past year or two.

Skyrocketing fuel prices have pushed the cost of both diesel and gasoline to record levels, triggering automatic increases in fuel surcharges assessed by LTL carriers. Most truckload carriers that already had surcharges in place have been forced to raise them, while carriers that hadn't been imposing those charges have had to implement them. Some shippers that have refused to go along with those increases have found their carriers unwilling to continue serving them.

Many carriers are unable to restore the capacity they cut during the recent economic downturn quickly enough to handle all of the freight they're now being offered. The shortage of drivers has only exasperated this situation.

Not to be overlooked are the higher stop-off charges many truckload carriers have invoked. We've seen a few of those charges jump as high as $500 for third and subsequent stops. In addition, many truckload carriers are trying to give drivers more time behind the wheel by cutting free time for loading to as little as one hour and imposing hefty detention charges if vehicles are held longer.

If you want to keep your company's transportation costs in line and your products moving for the rest of the year, you'll need to anticipate these conditions and be ready to deal with the challenges they present.

Editor's Note: For more on these issues, see "Truckload rates kick into high gear" on page 35 in this issue.