U.S. Truckload Carriers Focused on Energy Conservation and Profitable Growth
Last week, I had the pleasure of meeting with over 20 small, medium and large U.S. based truckload carriers and 3PL’s. It was an interesting experience.
I am pleased to report that the mood is more upbeat. For the first time in over a year, truckload carriers are seeing an upswing in volume. This appears to a result of two factors. First, there appears to be an increase in demand. Second, as reported in a previous blog, the supply side has tightened as carriers exit the market and park excess equipment. It remains to be seen whether this increase in business is a short lived aberration or indicative of a trend.
There is a new four letter “f” word in the trucking industry. It is called fuel. Every carrier is very focused on the severe impact that fuel costs are having on its operations. Carriers are monitoring their miles per gallon and creating programs to improve performance.
To offset fuel costs, carriers are searching for new mileage based fuel surcharge formulas that better relate driving distances to fuel consumption. They are fighting hard to secure these charges or walking away from non-compensatory business.
In addition, many truckers are taking steps to rein in excess fuel costs. These actions include the use of speed limiters or governors, efforts to reduce idling time, a careful focus on out of route miles, control of empty miles and addressing problem lanes where backhaul is difficult to achieve. In fact, in cases where backhaul is difficult to find, carriers are seeking and securing round trip rates. In some instances, the shipper must pay the full round trip rate or risk not finding capacity.
Several truckload carriers are changing their relationships with 3PL’s, particularly freight management companies. Accusing load brokers of retaining the fuel surcharges received from shippers and not sharing them with their carriers, some truckload operators have ceased doing business with non-asset based freight management companies. With demand increasing and with fuel costs so high, these carriers are seeking their own customers rather than relying on freight brokers for their business.
This is a trend that shippers should be watching carefully. With capacity tightening, shippers need to ensure that their freight brokers have a stable of loyal carriers that they can rely on. If the freight broker needs to go to the spot market or “load boards” to find carriers, this may be a signal to search out asset-based companies rather than have your freight sit on your dock.
As we come to the end of this “freight recession,” there are some carriers that won’t make it through the tunnel. This is what happened last week as one of my appointments cancelled at the last minute and indicated that they were closing their doors. One of the major contributors cited was a failure to secure a level of fuel surcharges to cover its fuel costs.
While it is regrettable to see long established carriers exiting the market, the good news is that the survivors appear to be adopting sound business strategies, are more knowledgeable about their costs and are more focused on their key customers and niche markets where they have density and profitable rates. They are managing their fuel consumption much more effectively than in the past. This will result in a healthier transportation industry that will benefit everyone.