Always be prepared

By Jeff Berman · June 7, 2010

Much has been made lately about higher freight transportation rates for shippers these days.

Given the economic environment during that time, coupled with lack of consistent demand, tight credit and cash flow, and wildly fluctuating energy costs, there were—and continue to be—myriad challenges for shippers when managing supply chains during these still-challenging times.

Going back 12-to-18 months or more, when it was clearly a shippers’ market when it comes to pricing, the shoe is clearly on the other foot.

In fact, this quote from a story LM reported a little more than a year ago, pretty much sums it up. The quote is from Stifel Nicolaus analyst John Larkin:

“Shippers need to be forewarned that if [they] are beating up carriers on price, they can expect the favor to be returned once supply and demand tightens up.”.

Well, Larkin nailed that one. In June 2010, rates are up and capacity is tight. And it looks like this is a situation that may not be changing anytime all too soon, given the pace of the recovery and the underlying theme of uncertainty which clearly still lingers.

Are increasing rates forcing shippers to re-think supply chain operations to any meaningful extent? If not, perhaps they should as it looks like higher rates are here to stay—for a while anyhow.

In fact, a recent whitepaper from our friends at TranzAct Technologies does a terrific job at analyzing factors that clearly have the potential to keep shippers up at night, regarding drivers for higher rates.

Without giving away the farm, here are a few items that TranzAct cites for continued rate pressure for shippers, with transportation costs potentially rising 10-to-20 percent within two years:

  • sharp fluctuations in energy costs;
  •  
  • tightening capacity as shipper demand outstrips carrier supply; and
  •  
  • federal legislation or new rules from the Department of Transportation that increase the cost of doing business for carriers.

This is only the tip of the ice berg in terms of the valuable information in this whitepaper. To learn more, go to www.tranzactinside.com.

In any event, staying on top of things is paramount. Not doing that can hinder operations, harm business credibility, and do other harm. During these challenging time, shippers and carriers need to stay on top of their games to be better prepared for rate pressure, energy price spikes and anything else that comes along. Always be prepared for the unexpected.

Have a great week-JB

 


About the Author

Jeff Berman
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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