FTR Shippers’ Condition Index at lowest level since 2004
April 14, 2011
As various factors such as increasing diesel prices, tight capacity, and rate pressure continue to take hold in the freight transportation market, they appear to be taking a toll on shippers, according to the April edition of the Shippers’ Condition Index (SCI) released this week by freight transportation consultancy FTR Associates.
The SCI’s current reading of -7.7 indicates what the firm described as “continued deterioration,” with the outlook for capacity shortages getting worse. FTR bases the SCI on “all market influences that affect shippers,” with a reading of zero reflecting a solid environment and anything below zero an unfavorable environment.
FTR officials said that the SCI is approaching levels that have not been seen since 2004, which was a difficult time for shippers. They added that shippers are currently feeling the impact of tighter capacity, with base rates for major modes—and their respective fuel surcharges—on the rise, adding that while they may see relief on fuel surcharges later in the year base rates are likely to continue heading up.
In an interview with LM, FTR Senior Consultant Larry Gross said that what is currently happening when it comes to rates is essentially a carrier—or supplier—market.
“There is no question about that, but it is not being done in a vindictive way,” said Gross. “This is just the way supply and demand works, and right now we are going to go into a period of tight supply, which means that pressure is going to be on the shippers.”
And with driver ability being the true key to capacity and the situation continues to tighten, Gross explained that carriers are going to be looking “very differently” at shippers that provide them the opportunity to make good use of their drivers compared to shipper customers that don’t make good use of drivers.
An example of the latter would be a shipper that experiences routine delays or has shipments tied up at loading dock, which from a carrier’s standpoint is undesirable and waste drivers’ time.
“That type of shipper is going to find it a whole lot more difficult to get capacity, and it will get more expense for them to get freight moved, with carriers becoming more discriminating,” said Gross. “Shippers are not helpless here; they can do things that are going to help them during this tight capacity situation.”
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