The recession has caused many shippers to reduce production levels, integrate factories and/or warehouses and modify shipping patterns. Some trucking companies are experiencing declines of 20, 30 or even 40% in freight volumes. As a result, this is necessitating changes in their business operations.

The last blog focused on the impacts of these declining volumes on carriers. As outlined, this includes the integration of terminal networks, the closure of terminals, the parking of trucks, layoffs or shorter work weeks for line and staff employees and other defensive measures. Some carriers are also going on the offensive by forming marketing alliances, changing/expanding their geographic footprint and/or targeting new segments of business (e.g. heavy LTL shipments etc.).

This blog will examine the impacts of some of these changes in carrier strategies on shippers. It is important for shippers to be aware of these changes since they may have a direct impact on availability of equipment, on transit times and on how your freight is being handled. Here are some issues to consider and some questions to ask your core carriers.

Impacts of Carrier Strategies on Service

a) In view of the reduction in freight volumes, is your LTL carrier holding your freight an additional day or more to build better load factors?
b) Are they now moving your freight through a break bulk terminal or using an interline carrier?
c) Are you experiencing any increases in damages or misloaded freight?
d) Does your truckload carrier have enough equipment and drivers in its fleet to meet your ongoing needs?
e) If your company is now receiving a degraded level of service from one or more of its core carriers, can you obtain a higher level of service from the competition?
f) Is the competition truly able to provide a superior service?
g) As the rate of carrier bankruptcies begins to escalate, will any of your carriers be casualties?
h) Have you solid back up carriers in place on all of your shipping lanes?
i) Are you providing them with loads during the downturn so they will be there for you when one or more of your core carriers leave the market?
j) Will they have adequate truck capacity when the economy picks up?
k) Will your truckload carriers continue to provide LTL service as the recession comes to a close?
l) Will your LTL carriers continue to move your truckload traffic?

Impacts of Carrier Strategies on Rates

a) Are your freight rates in line with the service your company is receiving from its core carriers?
b) Are you aware of the current market level freight rates on all of your shipping lanes?
c) When was the last time you benchmarked your freight rates or conducted a freight RFP?
d) Will the low freight rates you are paying be sustained as the economic rebound begins to unfold?
e) While you have the leverage, is this the time to negotiate reduced freight rates with your carriers and lock them in for the next two or three years to protect your company from the inevitable rate increases and carrier failures?

Preparing for an Economic Recovery

Many economists are now saying that the economies of North America have hit bottom and we are on track for a recovery. In view of the high levels of unemployment and with many consumers having negative equity in their homes, the rebound is expected to be slow and bumpy. During an economic inflection, this is typically a period when some of the weaker carriers exit the market. This may be an opportune time to re-evaluate all aspects of your freight program to ensure your company is well positioned for the turnaround.