Freight and Our Economy

I read a blurb on the TIA website about the future "up tick" for our economy and I wonder when it is going to come. I have yet to see any reports of freight for the fourth quarter of 2007, but I know from experience that it is down. Our Federal Reserve Chairman speaks of cutting interest rates to stave off a recession, but I don't know if it is too little or too late. Housing continues to be in a slump and fuel prices continue to rise.

For the transportation industry, this translates into more downward pressure on prices with capacity being unfilled. Trucking companies will continue to lower prices in an effort to gain market share to keep their trucks moving and pay their set costs, while brokers and logistics companies will battle to hold ground using pricing strategies, spot quotes, etc to take full advantage of the daily market fluctuations. The ultimate transportation winner in this type of economy is the customer, who can reap the benefits of lower prices and less service issues, but it also creates challenges for the future. The number crunchers for each company/shipper expect their own Logistics department or their outsourced Logistics department to control prices, and they will be able to show some savings for this year. But when the uptick comes after truck capacity has been trimmed down-because some trucking companies have gone out of business-freight costs will increase. The one factor that can counter the higher freight rates will be lower fuel prices, which equals lower fuel surcharge costs, (but I don't forecast lower fuel prices in my lifetime).

The immediate time during and after the uptick will be a challenge for brokers and logistics companies as well. Brokers will have to rely heavily on their relationships to keep business, get trucks and raise prices, all at the same time. The broker must have strong relationships not only with customers, but with carriers as well or they will find themselves in a terrible pinch.

Yes, the slower economy will be tough for everyone, but we as brokers are conditioned to handle adversity. Adapt or fail. It's just that simple.