Subscribe to our free, weekly email newsletter!


Are you on the precipice?

By Michael Levans, Group Editorial Director
December 20, 2010

I’ve traditionally chosen to stay clear of predictions and forecasts in our December Buyers Guide issue, but I found it too hard to pass up this year considering that many shippers may now find themselves standing at the edge of a precipice. Why do I sound so dire during this otherwise festive time of year?

As John Schulz and Jeff Berman report in our news section, and as John Gentle and Wayne Bourne suggest in their joint Sage Advice column (pages 112-113), the outlook could indeed become very grim for those shippers who did not take the extra steps over the past two years to truly understand the position in which their motor carriers found themselves.

As we’ve been documenting over the past 24 months on logisticsmgmt.com and in our print pages, motor carriers had been caught in an operations maelstrom as volumes dropped and predatory shippers did their best to squeeze rates until it literally hurt. “Rates were drained of any meager margins as many shippers took advantage of the capacity flip,” says Bourne. “It was definitely a short-term gain.”

During that period, Bourne and Gentle used our pages—and their combined 70 years of experience—to spread the gospel of “partnership,” urging shippers to keep carrier viability top of mind in any rate negotiation. What good is a carrier partner to you, they asked, if he can’t afford to stay in business?

Fast-forward to December 2010 and we find an ailing economy on the mend. And with that positive news rides the specter of a capacity crunch driven by a growing number of issues, including the challenge of putting equipment back on the road—and quickly—as well as a looming driver shortage that could be exacerbated depending on the outcome of unresolved hours-of-service and Comprehensive Safety Analysis (CSA 2010) regulations.

In fact, Schulz reports that in 2004, the peak of the last great time in trucking, the industry found itself about 150,000 drivers short. Next year, there could be a shortage of as many as 100,000 drivers or more. But analysts warn that any changes in hours-of-service or the new CSA 2010 could push that number up to 300,000 by 2012.

On the equipment side, carrier executives are sending out a not-so-subtle warning this holiday season. “It’s hard for carriers to justify the rate of return when considering adding capacity right now,” US Xpress President Pat Quinn told LM during a conversation at the NITL annual meeting. “If we add a tractor and three trailers in 2006 it was about $130,000. If we add that today it is $195,000. Who is paying me that differential to do it? Nobody. As a consequence, until that return pays itself off nobody is going to do it.”

Shippers now need to look in the mirror and ask if they’ve heeded the “Sage Advice” of Bourne and Gentle. Have you taken the time to sit down with your motor carriers to understand their situation? Has this time forced you to understand that the shipper/carrier relationship should be strategic and not simply transactional?

And while many companies have taken a more productive, long-term approach in their carrier negotiations, others have stuck with an opportunistic, short-term approach that has only helped to winnow down the list of available carriers. It is the latter who may now find themselves on the edge of the precipice.

About the Author

image
Michael Levans
Group Editorial Director

Michael Levans is Group Editorial Director of Peerless Media’s Supply Chain Group of publications and websites including Logistics Management, Supply Chain Management Review, Modern Materials Handling, and Material Handling Product News. He’s a 23-year publishing veteran who started out at the Pittsburgh Press as a business reporter and has spent the last 17 years in the business-to-business press. He’s been covering the logistics and supply chain markets for the past seven years. You can reach him at .(JavaScript must be enabled to view this email address)


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The PMI, the ISM’s index to measure growth, increased 1.8 percent to 57.1 in July. This is 1.8 percent higher than the 12-month average of 55.3. The PMI has grown in 18 of the last 20 months, with economic activity in the manufacturing sector expanding for the last 14 months as the overall economy was up for the 62nd consecutive month.

YRC Worldwide, whose regional and long-haul units provide the second-largest LTL capacity in the trucking industry, narrowed its second-quarter loss to $4.9 million on $1.32 billion revenue, compared with $15.1 million loss on $1.24 billion revenue in the year-ago quarter.

With NFL training camps in full swing, it stands to reason that Congress must be replete with football fans, given how it basically has elected to punt on federal transportation funding yet again, with the Senate yesterday signing off on a ten-month bill to keep federal surface transportation funding intact through May 2015 through a nearly $11 billion stopgap measure.

Carload volumes were up 4.3 percent at 306,988, and intermodal volume for the week ending July 26 was up 3.3 percent at 264,809

Lyon, France-based Norbert Dentressangle, a $5.5 billion global third-party logistics (3PL) services provider focused on global logistics, transport, ocean, and air services, said today it has acquired Des Moines, Iowa-based Jacobson Companies, a value-added warehousing (VAW) company, for $750 million from private equity firm Oak Hill Capital Partners.

Article Topics

· Logistics · December 2010 · Mike Levans · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA