Q&A: Transplace CEO Tom Sanderson
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When it comes to assessing the myriad moving parts of the freight transportation and logistics markets, Transplace CEO Tom Sanderson is a great person to have put things into perspective. Logistics Management Group News Editor Jeff Berman spoke with Sanderson at last month’s CSCMP Annual Conference about various industry-related topics. A transcript of their conversation is below.
Logistics Management (LM): Given what we are seeing with the economy with a declining GDP and sluggish retail sales, among other things, how do you view the freight economy?
Tom Sanderson: I would say it is soft overall. Housing sales are up but still 50 percent below pre-recession levels. Retail sales are not great and manufacturing is flat.
LM: Is Peak Season ‘muted’ again this year?
Sanderson: It is. In August, intermodal shipments in containers hit an all time record, but I think that had more to do with modal shifts. When fuel prices head up, you get a much better fuel surcharge on intermodal and many shippers are turning to it for longer haul loads.
LM: There continues to be a lot of confusion and frustration with CSA. How would you describe the current state of CSA at this point?
Sanderson: FMCSA continues to change the rules with this. Scores are being published by FMCSA, and shippers are choosing carriers based on those. It is really unfair to both carriers and shippers to leave scores out there when FMCSA is acknowledging with the ongoing changes being made that CSA is still a work in progress. It should not be in public view until they get it right.
LM: In your opinion, what is worse for shippers and carriers, CSA or HOS?
Sanderson: I think CSA is worse because you have a lot of small carriers being denied freight because shippers are saying you have an alert or a bad CSA score and cannot move my freight. Those carriers are operating on slim margins and that can hurt capacity. From a liability standpoint for the shippers, whether you are using the scores or not, should an accident or fatality occur shippers are going to be sued.
For HOS, we are very concerned about the 34-hour restart because that without a doubt is going to take effective capacity off the highway and because of the nature of that there are going to be a lot of trucks on the road Monday morning at 5 am that ordinarily would have left Sunday night. Nobody in their right mind would say that is going to reduce accidents on the highway. So far, it is so good for keeping daily driving hours at 11 but that battle is not permanently won. It is going to be constantly challenged.
LM: What about trucking capacity? Many have said were GDP to double that the already difficult driver shortage situation could significantly worsen.
Sanderson: That is correct. It would probably be worse than 2004-2005, when we routinely saw double-digit price increases out of truckload carriers. Much of the turnover we see is like musical chairs in a sense as drivers go from one carrier to another.
LM: Regarding the recession and the economy, and the “dark days” of 2009, what are some of the lessons learned in the sector between then and now?
Sanderson: Pricing has firmed up. During the downturn, there were pretty significant price cuts on LTL, truckload and intermodal, and capacity was just abundant. No matter how quickly carriers could shed assets, the freight was going way faster. We are seeing low single digit-type rate increases on an annual basis. There is still adequate capacity out there to get your freight moved on time at a reasonable rate with good carriers.
LM: Which mode do you think has the best pricing power at the moment?
Sanderson: I would say refrigerated truckload, because that is where the capacity is tightest. You saw it a lot with longhaul refrigerated over the road truck freight and where a lot of longer haul van freight has been converted to intermodal and through the recession people kept eating and so that is where the pricing power is.
LM: Who is not as well equipped when it comes to pricing power?
Sanderson: Truckload and flatbed probably.
LM: How do you view the current state of the spot market? While capacity is not as tight as it was a few months ago, it still seems to be doing well.
Sanderson: A lot of shippers are comfortable with the idea of using two or three large brokers to supplement their core group of asset-based TL carriers so that fills a hole for them to deal with smaller carriers out there. And that is why you are seeing a lot of spot market action. It is a two-way street, because when the economy picks up and capacity is short, spot market brokers will feel that too.
About the AuthorJeff 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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