What's behind the door?

By Michael A. Levans, Chief Editor -- Logistics Management, 1/1/2007

The cover of LM's january issue aims to communicate what shippers will be experiencing in the coming year. Our goal is to validate the gut feelings shippers have about their upcoming transportation expenses in a bold, foretelling icon—an immensely difficult concept to illustrate.

Yet I believe we really nailed it the past two years. In January 2005, our design team gave us a swirling vortex sucking hundred-dollar bills into an abyss. In January 2006, we produced a shipper struggling through a seemingly endless set of one-armed push-ups—an image that defined the Herculean effort shippers would need to exert in order to keep their freight budgets in line.

This year was a bit tricky. For the first time in three years, the economists and industry analysts interviewed for our annual Logistics Outlook confirmed that there is a glimmer of relief in sight for shippers who are willing to put in extra effort when negotiating with their truckload (TL), less-than-truckload (LTL), and ocean carriers. With that in mind, this year's image depicts a shipper opening a ponderous metal door. Gleaming ever so subtly from the cracks of the doorframe are rays of light. Yes, our shipper is struggling, but there's light on the other side—the real struggle is getting the door open to see exactly what the light represents.

Once again economist Elizabeth Baatz has done a terrific job helping us prepare for what awaits behind the door. She's put together a balanced economic forecast and has neatly tied that insight into our annual freight-rate projections for 2007, beginning on Page 22.

Baatz takes us deftly and succinctly through each mode and offers shippers food for thought on how to take advantage of any new rate-relief opportunities—and raises some critical red flags for rail and parcel express shippers along the way. As readers are likely already experiencing, capacity and negotiation power are sliding into their hands on the TL side. We're predicting the TL sector will have excess capacity until at least May or June; so perhaps now is the time to put the formal bid process to work and lock in service, capacity, and rates for '07.

Our team also predicts slight pricing increases in LTL over the next year, with fuel surcharges remaining flat or declining modestly due to lower fuel costs. This is certainly welcome news for shippers, but could spell continued rocky times for TL and LTL carriers. As John Schulz reported back in November, fuel surcharges have become “as essential to the survival of the trucking companies as air brakes, tires, and semi-trailers.”

As we did last year, we'll dig deeper into Logistics Outlook in a live webcast on Wednesday, January 31. I'll be joined by a team of economists to give more perspective to our rate forecasts and answer questions in real time. Registration details can be found on Page 26. Last year over 1,500 readers joined us for the session. I look forward to seeing you there this year.