In the current “freight recession” climate that has now taken hold in North America, the pendulum has clearly swung back in favour of the shipper. With declining freight volumes and excess capacity, shippers are now able to negotiate rate concessions and fuel surcharge reductions. It wasn’t that long ago that carriers were leveraging driver shortages and capacity constraints to raise rates.

The more knowledgeable shippers and carriers know that the current economic weakness will not last forever. In fact, the economic gurus are predicting a 6 to 8 quarter slowdown followed by a sharp upswing. Since many large truckers are reducing capacity by parking trucks, cutting back on truck purchases and freezing driver hires, some folks are predicting a serious capacity shortage when the “freight recession” comes to an end. This could lead to a sharp increase in rates.

What Transportation Strategy Should My Company Adopt?

For shippers, the option is certainly there now to “beat up” on your carriers and extract a “pound of flesh” in terms of rate concessions. This is a tempting strategy for shippers looking for a short term boost to their company’s bottom line. However, it is important to keep in mind that not all carriers are created equal. In many cases, the carrier offering the lowest rates is the carrier with the lowest quality service. These are often the carriers that are the most desperate and the ones that most need cash flow. Often times, these are the carriers that are most likely to cut corners, to hold LTL freight in their docks an extra day, to drop your freight when the economy picks up and higher yielding freight becomes available. The term now being used by one high profile trucking executive is “firing shippers.” Do you want to put your company in that position?

It is important to understand that not all low priced carriers are poor performers. There are some carriers that are better managed than others and do a superior job of cost control and asset management. As a shipper, this translates into superior service for your customers. The key thing to think about is have you surrounded yourself with a group of core carriers that offer consistent service at competitive, but not necessarily the lowest rates, on a long term basis? Here are few questions to ask yourself?

How did these carriers treat your company during the period of capacity constraints in the mid 2000’s?
Did they “sting” your company with heavy duty rate increases?
Do they provide consistent service year after year?
Did they de-market or “fire” your company during an economic upswing and come running back asking for your business during the “freight recession”?
Are they willing to commit to a multi year rate agreement that is fair to both parties?
Do they demonstrate through their transit times, customer service and business relationship that they are committed to your company?

Have you thought about Loyalty as a Strategy?

In essence, have your core carriers demonstrated loyalty and fair play during the good times and the bad times? Have you demonstrated loyalty to them?

We live in an era where many buzzwords such as partnership and shipper-carrier collaboration have become overused and meaningless. How about tying old fashioned loyalty? How about recognizing your true, “loyal” core carriers? How about recognizing their importance to the success of your company? How about receiving from them an acknowledgement and recognition of the importance of your business to their company. This strategy may not work with every one of your core carriers. It takes a high level of trust, maturity and commitment; call it loyalty, to make it work. However, I suggest to you that this strategy offers you a framework on which to build a long lasting and successful transportation strategy.