Despite rate pressure, shippers hang tough
January 23, 2012
In my line of work, I get a lot of e-mail. Actually, make that A LOT of e-mail. And in many of these e-mails, there is a common theme when it comes to transportation rates: they have been going up and are expected to continue to do so.
Now, I am pretty sure that it is not new news by any means but at the same time it bears repeating all the same, especially for those of you reading this that are buyers of freight transportation and logistics-related services.
Looking at the trucking market, for example, we know capacity is on the tight side and has been that way for a while. Couple that with the high amount of uncertainty regarding the economy (i.e. “the new normal”) and it is easy to see that carriers are in no rush at all to add new capacity.
And really why should they be when they are having a difficult time finding drivers and clearly have the upper-hand on all things rate-related at the moment? And when federal government regulations kick in further down the road—like HOS and EOBRs to name two—things have the potential to become even more advantageous on the rate side for carriers, which leaves shippers in a tight spot to say the least.
Take the current rate situation and couple it with fuel prices potentially escalating in a meaningful way again and it is easy to see that things remain pretty tough for shippers.
But again if you are in the trenches every day as a shipper, this is obviously old hat to you.
It is not just trucking either. Rail rates have seen steady increase in the 5 percent range give or take in recent years and air rates typically are on the high end due to fuel prices, of course.
But regardless of rates, shippers need to move freight amid the obstacles. This is not an easy thing to do in light of rate pressure either, but they are still finding ways to make it happen, which is admirable and commendable.
And they are doing it in many smart and effective ways such as increasing intermodal usage, cross-docking, shifting to dedicated services or developing better and improved relationships with their carrier and 3PL partners.
These things are effective practices but require a great amount of work, time, and patience, too.
Every day brings new challenges and pricing pressure in all likelihood is at the top of the lost for most shippers on a daily basis. The shippers that know how to most effectively handle these challenges are the ones that do and will continue to remain at the top of their game.
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