NASSTRAC CEO panel takes close look at industry pricing dynamics
Even though the economy is clearly not running on all cylinders, things are better than they were just a few years ago, especially in related supply chain, freight transportation and logistics sectors. And as things slowly get better, pricing has returned to the forefront as a balancing act between shipper and carrier relations. That was a main takeaway at the CEO Panel of the recently-concluded NASSTRAC Annual Conference in Orlando, Fla.
Events in the NewsDespite signs of progress, Federal Railroad Administration calls PTC implementation ‘uneven’ Despite sluggish volumes, IANA’s Casey makes case for future intermodal growth at RailTrends Railroad leaders stress importance of trade deals KCS and BNSF team up for cross-border intermodal service to begin in December AAR calls on STB to stop major rulemakings for the time being More Events News
Events ResourceUnwrapping the Hidden Value of a Parcel System The growth in e-commerce sales and omni-channel distribution has forced more shippers to re-evaluate the way they handle parcel shipments.
Even though the economy is clearly not running on all cylinders, things are better than they were just a few years ago, especially in related supply chain, freight transportation and logistics sectors. And as things slowly get better, pricing has returned to the forefront as a balancing act between shipper and carrier relations. That was a main takeaway at the CEO Panel of the recently-concluded National Shippers Strategic Council (NASSTRAC) Annual Conference in Orlando, Fla.
Executives on the panel included Shelley Simpson, Chief Marketing Officer-EVP, President of ICS at J.B. Hunt, Virginia Albanese, President and CEO of FedEx Custom Critical, James Welch, CEO of YRC Worldwide, and Brad Jacobs, CEO and Chairman of XPO Logistics.
“If you think about right after the recession, price was probably the key component inside the value equation from a shipper perspective and that led to the carrier perspective,” said Simpson. “It is about costs as a carrier and costs as a shipper, and what we see really emerge over the past two-to-3 years is coming off of this very low re-setting of prices in the industry and really moving forward and having to think about costs in a whole different way than just a price from point A to point B.”
Taking that point a step further, Simpson explained that she has yet to meet a shipper that has not told her their costs need to be reduced, and that she has not met a transportation provider that has not said their costs are going up, making for a critical component of opposing objectives shippers and carriers need to think about so they can work together.
And instead of taking the approach of adding a certain number of intermodal containers or trailers, Simpson said that from the initial bid process with a shipper, Hunt focuses on how much freight is getting optimized, which in turn adds value, as well as capacity and price consistency for shippers.
“We are trying to be more fluent with that process as well,” she said. “So instead of looking at these things only during the bid process or annually to see how our equipment will look like, we can now do that in a shorter-term period to see if we were ahead or above the best of our ability for planning. If providers are focused on price in the way shippers are looking at it from the cost perspective, and we optimize to provide the best answers—which is to use one of our services—which could be consolidating LTL shipments into full truckload or shift freight to intermodal from truckload that is what we will suggest. Rather than just selling equipment, we are looking to provide a total answer.”
For the expedited market, FedEx Custom Critical’s Albanese stated that how things have been approached in that sector has changed in the last 25 years as providers continually re-tool their networks to provider deliveries within a certain timeframe and to be the best at providing that service by relying on speed as a selling point as a value proposition.
“We are all in an economy where if we are not reinventing ourselves and not looking at and figuring out what is the next value-add, then we are going to have some problems,” she said.
In addressing how FedEx Custom Critical views pricing, a focus on being efficient in helping customers is the ultimate win-win.
One such way this is occurring is with FedEx Custom Critical putting on-board scanning systems into the trucks of its independent contractor partners. These systems are highly beneficial in that it prevents delays for cross-border shipping as well as for temperature-controlled services.
What’s more, she highlighted how these systems provide a higher quality of service for FedEx Custom Critical, explaining that “we have to work together and shippers need to save money on transportation costs and carriers need to control costs and make money.
YRC chief Welch said picking up and delivering freight on time, coupled with focusing on what a customer wants and listening to them, is key.
“There is a lot of opportunity in the LTL space from a transcontinental perspective,” he said, “but not everything can be optimized or run through an IT system. There is still a very basic need for the trucking industry to be right in front of the customer, listening to their needs and adapting to their changing patterns. Today’s customer is tomorrow’s partner and the next day’s competitor. It is something we are very aware of and it is also important not to forget about the basic fundamentals of executing.
Welch added that pricing in the LTL industry is as rational as he has ever seen in his career. And he said that with 3PL’s becoming more active on the LTL capacity front and the need for LTLs to recapitalize their fleets and get a high return on those investments also factors into pricing.
Like Albanese, XPO’s Jacobs expounded on how the central differentiation is service, especially considering the fact that with the IT advancements being made prices have to an extent become very transparent.
“Even the smallest of shippers can go online to get rates he needs,” said Jacobs. “Pricing is not the main differentiator, instead it is more 97-to-98 percent on-time delivery and track and trace technology so shippers know where there freight is. We have the technology that is measured but is not as objective and to the extent that service providers can efficiently pick up and deliver is what ensures they get the business at market prices which are already known.”
About the AuthorJeff Berman, Group News Editor 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
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!
Transportation of freight in containers was first recorded around 1780 to move coal along England’s Bridgewater Canal. However, "modern" intermodal rail service by a major U.S. railroad only dates back to 1936. Malcom McLean’s Sea-Land Service significantly advanced intermodalism, showing how freight could be loaded into a “container” and moved by two or more modes economically and conveniently. As with all new technologies, there were problems that slowed the growth, which influenced many potential customers to shy away from moving intermodal.
Click here to download
Moore on Pricing: The other TMS functional options 2017 Rate Outlook: Where are freight transportation rates headed? View More From this Issue