As 2008 winds down I think back to the hurdles we as transportation intermediaries, 3pls, freight brokers or whatever you want to call our industry experienced. I recall the first quarter when fuel prices were climbing as freight rates were irrationally going down, which led into the second quarter where we saw even more trucking companies to go bankrupt as fuel prices continued to climb, and then somewhere around the end of the second quarter or beginning of the third quarter freight rates shot back up as truck capacity tightened and fuel continued to hit new highs. And finally the fourth quarter saw fuel level off and actually drop; and freight rates drop as fast or faster than fuel as companies battled for business.
I have been in this business for 15 years and I can say this has been the most unpredictable, unstable year I have ever seen. Through those fifteen years I saw fuel surcharges come and go. I saw the new hours of service rules go into effect and everyone say that it would do away with milkruns because of stop off requirements and on duty hours, (stop charges went up because of it, but they have since dropped back down). I experienced the craziness caused by Hurricane Katrina as oodles of trucks went to that part of the U.S. to haul high paying FEMA loads. And every now and then I have heard trucking companies complain about the lack of qualified truck drivers and how we are one day going to have an extreme shortage because all of the older experienced professional drivers are going to retire. I could go on with many more examples of adversity and changes I have seen in this industry, but time limits me.
What will 2009 hold in store for us??? I have no clue. All I can say is that 2008 was a rollercoaster ride like never before and I hope 2009 has less corkscrews in it.
But don't worry, I'll have my safety harness on just in case.
Wednesday, December 10, 2008
Thursday, December 4, 2008
Recent bumper sticker
In my recent travels I saw a bumper sticker that made me smile. It stated, "I'm voting for the Old Man and the Hot Chick"-in reference to the recent presidential election. As the truck turned left in front of me I began to recall other bumper stickers that have humored me and the one that stands out in my mind relevant to the transportation industry is the large sticker on the rear door of some trailers that reads, "Say no to cheap freight." Each time I see this message I wonder where the truck is going and how much the load is paying to the truck.
The "Say no to cheap freight" approach sounds simple in theory, but we live and operate in a real world that is driven by capitalism. I only wish it were this simple. But alas the market determines the price and until we define what cheap freight is, we can't even attempt to adopt the "Say no to cheap freight" creed. What might be cheap to one company isn't cheap to another. One company might require higher rates on loads than another because they have a higher overhead. You could go on and on with the debate and it wouldn't amount to a hill of beans since it is all relative. In the free market supply and demand rule with iron fists and technology contributes even more to the fluid nature of rates by allowing information to be sent within seconds.
The "Say no to cheap freight" approach sounds simple in theory, but we live and operate in a real world that is driven by capitalism. I only wish it were this simple. But alas the market determines the price and until we define what cheap freight is, we can't even attempt to adopt the "Say no to cheap freight" creed. What might be cheap to one company isn't cheap to another. One company might require higher rates on loads than another because they have a higher overhead. You could go on and on with the debate and it wouldn't amount to a hill of beans since it is all relative. In the free market supply and demand rule with iron fists and technology contributes even more to the fluid nature of rates by allowing information to be sent within seconds.
Monday, December 1, 2008
Old files
As I was perusing through the bottom drawer of my file cabinet I stumbled across quite a few files of customers I called on in the past that are no longer in business and I couldn't help but wonder which companies might be next. It was officially announced today that the United States has been in a recession since December of 2007. I believe I speak for most everyone in the transportation industry when I say; "Who didn't know that?"
Our industry is the first to feel upswings and the first to feel downswings in the economy. I could have told some economist this news around January 2008 and it would have saved a lot of research money in the process. The difference between now and then is that the rest of the world is locking in on the recession mode as well with banking and financial troubles spreading like a pandemic.
And so it is with economic cycles.....we go up, we go down. We go up and then down. How low will it go? How long will the downturn last?-both million dollar questions. And another question that weighs heavily on transportation company minds is; will GM, Ford and Chrysler be able to weather the storm?
Our industry is the first to feel upswings and the first to feel downswings in the economy. I could have told some economist this news around January 2008 and it would have saved a lot of research money in the process. The difference between now and then is that the rest of the world is locking in on the recession mode as well with banking and financial troubles spreading like a pandemic.
And so it is with economic cycles.....we go up, we go down. We go up and then down. How low will it go? How long will the downturn last?-both million dollar questions. And another question that weighs heavily on transportation company minds is; will GM, Ford and Chrysler be able to weather the storm?
Monday, November 24, 2008
Giving Thanks for every Load
I apologize for the long hiatus, but I have returned just in time for Thanksgiving and I wish everyone out there a happy turkey day.
My, oh my, how things have changed since my last post. We made it through extremely high fuel prices, we made it through another Presidential election and now we are going to have to make it through a bad economic period; and each company out there should give thanks and be grateful for every bit of business they get during this time.
In a weak attempt to be optimistic, low fuel prices should help companies stay within their transportation budgets. And any RFQs by shippers should show favorable returns as transportation companies again try to retain market share through pricing.
Survival of the fittest still applies as companies tighten their belts and keep a close watch on debtors and creditors. I suspect bankruptcies will continue to thin the ranks of U.S. Corporations and I remain hopeful that we will not see a tremendous trickle down effect caused by these bankruptcies.
The Green movement seems to have lost some momentum with lower energy prices, but it isn't dead. Money is the driving force behind almost everything and as long as going green is cost prohibitive, it will have to ride in the back seat for a while.
My, oh my, how things have changed since my last post. We made it through extremely high fuel prices, we made it through another Presidential election and now we are going to have to make it through a bad economic period; and each company out there should give thanks and be grateful for every bit of business they get during this time.
In a weak attempt to be optimistic, low fuel prices should help companies stay within their transportation budgets. And any RFQs by shippers should show favorable returns as transportation companies again try to retain market share through pricing.
Survival of the fittest still applies as companies tighten their belts and keep a close watch on debtors and creditors. I suspect bankruptcies will continue to thin the ranks of U.S. Corporations and I remain hopeful that we will not see a tremendous trickle down effect caused by these bankruptcies.
The Green movement seems to have lost some momentum with lower energy prices, but it isn't dead. Money is the driving force behind almost everything and as long as going green is cost prohibitive, it will have to ride in the back seat for a while.
Friday, May 9, 2008
Changes and Challenges
The transportation industry always seems to be constantly changing with new challenges (or opportunities-however you want to see it) right around the corner and no advanced warning of what lies ahead. And this is where the industry is today. Higher diesel fuel prices and low rates have driven many carriers out of business or caused one truck shows to park the rig to wait things out. Produce season has begun in Florida, paying large sums of money for trucks to haul fruits and vegetables and rates are as volatile as the availability of empty trucks.
The changes I have seen are:
1.)The days of a truck dead-heading a hundred miles to pick up a load or more are over. Dead-head is now limited to 50 miles or less, because it costs around $.75-$1.00 per mile in fuel for every mile the truck travels.
2.)Carriers have realized they can't turn a profit unless they take into account reasonable rates and a consistent fuel surcharge. They are demanding higher rates than before.
3.)Service issues are more common. Having less trucks equates to more problems.
4.)We can cover loads for a competitive rate on one day and then have to pay much more to secure trucks for the same loads the rest of the week.
5.)The weak US dollar is causing some U.S. manufacturers to change to U.S. based suppliers rather than buying goods from other countries. Canadian manufacturers will feel the brunt of this burden as their currency retains value.
And possible changes I see for the future are:
1.)Different organizations are lobbying to increase the bond to become a broker from $10,000 to $100,000 or more, which will make it more difficult for individuals to start their own company. But at the same time, it might keep some of the dishonest people out of this industry, reducing the number of crooks who double broker loads, or broker loads and never pay the carrier. (I have mixed feelings on this legislation. I believe this goes against the spirit of deregulation and the business freedom that makes this country great. But at the same time I despise the unscrupulous brokers out there who are nothing more than scam artists, cheats and liars).
2.)Deadhead surcharges for customers could become common. The higher diesel climbs, the more burden it places on carriers and the more critical deadhead miles become.
3.)The government could mandate a national fuel surcharge scale to be paid by all shippers and brokers. (I support this wholeheartedly. It would put everyone on a level playing field and the carriers would know whether or not they are being paid fairly.
4.)The green movement will continue to gain momentum. The effort to be green will be good for our environment, but it will come at a price and this price will eventually trickle down the customer. Are we willing to pay this price?
5.)Rates will continue to rise. As service issues for brokers and carriers increase, more and more customers will begin to focus on reliability and consistency rather than price. Relationships between brokers and carriers, brokers and customers, and carriers and customers are more important now than ever.
The changes I have seen are:
1.)The days of a truck dead-heading a hundred miles to pick up a load or more are over. Dead-head is now limited to 50 miles or less, because it costs around $.75-$1.00 per mile in fuel for every mile the truck travels.
2.)Carriers have realized they can't turn a profit unless they take into account reasonable rates and a consistent fuel surcharge. They are demanding higher rates than before.
3.)Service issues are more common. Having less trucks equates to more problems.
4.)We can cover loads for a competitive rate on one day and then have to pay much more to secure trucks for the same loads the rest of the week.
5.)The weak US dollar is causing some U.S. manufacturers to change to U.S. based suppliers rather than buying goods from other countries. Canadian manufacturers will feel the brunt of this burden as their currency retains value.
And possible changes I see for the future are:
1.)Different organizations are lobbying to increase the bond to become a broker from $10,000 to $100,000 or more, which will make it more difficult for individuals to start their own company. But at the same time, it might keep some of the dishonest people out of this industry, reducing the number of crooks who double broker loads, or broker loads and never pay the carrier. (I have mixed feelings on this legislation. I believe this goes against the spirit of deregulation and the business freedom that makes this country great. But at the same time I despise the unscrupulous brokers out there who are nothing more than scam artists, cheats and liars).
2.)Deadhead surcharges for customers could become common. The higher diesel climbs, the more burden it places on carriers and the more critical deadhead miles become.
3.)The government could mandate a national fuel surcharge scale to be paid by all shippers and brokers. (I support this wholeheartedly. It would put everyone on a level playing field and the carriers would know whether or not they are being paid fairly.
4.)The green movement will continue to gain momentum. The effort to be green will be good for our environment, but it will come at a price and this price will eventually trickle down the customer. Are we willing to pay this price?
5.)Rates will continue to rise. As service issues for brokers and carriers increase, more and more customers will begin to focus on reliability and consistency rather than price. Relationships between brokers and carriers, brokers and customers, and carriers and customers are more important now than ever.
Friday, April 11, 2008
Update
It has been a while since I have posted due to many reasons and factors, but I won't waste time by elaborating.
Needless to say, our transportation world continues to be tilted by the extremely high fuel prices being paid. More and more truckload carriers are beginning to park trucks rather than lose money and more truckload carriers are shutting their doors. The combination of low freight rates and high diesel prices is finally hitting home and we are seeing the first steps in the correction process.
From a broker standpoint, trucks are beginning to demand higher rates to take loads and they are justified in every way. Their expenses have been outpacing their revenue and customers continue to push for lower rates to control their transportation costs. But this is beginning to change.
We are also beginning to have more service issues as less trucks are available to take loads. Depending on the day and the area, trucks can be difficult to find or they can be relatively easy to find. But one thing is certain; they all want more money to haul the same loads they have been moving for the past year or more. The supply of freight is beginning to increase with the arrival of the Spring season and more produce moves. At the same time we are seeing a reduction in the supply of trucks caused by recent bankruptcies, etc.
I predict the next 6-12 months will be difficult for carriers, brokers, shippers, 3PLs, 4PLs and everyone involved in the transportation industry as the correction gains momentum.
Carriers will continue to face daily challenges by trying to balance revenue and rising costs.
Brokers/3PLs will continue to face daily challenges as trucking companies demand more money and customers continue to try control their freight spend. And the reduction in the number of carriers will impact their ability to provide lower rates and quality service.
Shippers will begin to see their freight spend go up and not just based on fuel surcharge increases. Base rates will rise. It is the only way the true trucking companies can stay in business.
Needless to say, our transportation world continues to be tilted by the extremely high fuel prices being paid. More and more truckload carriers are beginning to park trucks rather than lose money and more truckload carriers are shutting their doors. The combination of low freight rates and high diesel prices is finally hitting home and we are seeing the first steps in the correction process.
From a broker standpoint, trucks are beginning to demand higher rates to take loads and they are justified in every way. Their expenses have been outpacing their revenue and customers continue to push for lower rates to control their transportation costs. But this is beginning to change.
We are also beginning to have more service issues as less trucks are available to take loads. Depending on the day and the area, trucks can be difficult to find or they can be relatively easy to find. But one thing is certain; they all want more money to haul the same loads they have been moving for the past year or more. The supply of freight is beginning to increase with the arrival of the Spring season and more produce moves. At the same time we are seeing a reduction in the supply of trucks caused by recent bankruptcies, etc.
I predict the next 6-12 months will be difficult for carriers, brokers, shippers, 3PLs, 4PLs and everyone involved in the transportation industry as the correction gains momentum.
Carriers will continue to face daily challenges by trying to balance revenue and rising costs.
Brokers/3PLs will continue to face daily challenges as trucking companies demand more money and customers continue to try control their freight spend. And the reduction in the number of carriers will impact their ability to provide lower rates and quality service.
Shippers will begin to see their freight spend go up and not just based on fuel surcharge increases. Base rates will rise. It is the only way the true trucking companies can stay in business.
Wednesday, March 12, 2008
The Tide is Beginning to Turn
The escalating diesel fuel prices are beginning to impact truck capacity, at least in the short term. We are finding it more difficult to assign trucks to loads on all of our lanes, not just specific ones. Locally, I know of one truckload carrier that had more than 100 tractors that closed its doors last week, more than likely a casualty of cash flow problems created by the spike in fuel prices.
Truckload carriers are beginning to park trucks after finally realizing they will lose less money with a truck parked than a truck hauling low paying freight and deadheading to pick up the next load of low paying freight. The cut rate brokers/logistics companies in the industry will have to take a different approach to gain market share in the near future as less trucks will be available to pick up freight and the available trucks begin to demand higher rates.
All of the information I can gather doesn't tell me that our freight recession is over. The information only tells me that we are seeing a correction in our market place with supply and demand coming closer to each other. Factor in the beginning of produce season and we could see more freight than trucks in certain areas of the U.S. soon.
In summary; carriers are beginning to see the light at the end of the tunnel. They are finally taking trucks off of the road, (some voluntary, some involuntary), and this will affect rates that shippers pay. Shippers and brokers will begin to see more service issues as the truck supply begins to become strained and relationships will be tested as service failures become more common. Higher rates are on the way.
Don't you just love our dynamic industry?!
Yours truly, the transportation peddler
Truckload carriers are beginning to park trucks after finally realizing they will lose less money with a truck parked than a truck hauling low paying freight and deadheading to pick up the next load of low paying freight. The cut rate brokers/logistics companies in the industry will have to take a different approach to gain market share in the near future as less trucks will be available to pick up freight and the available trucks begin to demand higher rates.
All of the information I can gather doesn't tell me that our freight recession is over. The information only tells me that we are seeing a correction in our market place with supply and demand coming closer to each other. Factor in the beginning of produce season and we could see more freight than trucks in certain areas of the U.S. soon.
In summary; carriers are beginning to see the light at the end of the tunnel. They are finally taking trucks off of the road, (some voluntary, some involuntary), and this will affect rates that shippers pay. Shippers and brokers will begin to see more service issues as the truck supply begins to become strained and relationships will be tested as service failures become more common. Higher rates are on the way.
Don't you just love our dynamic industry?!
Yours truly, the transportation peddler
Friday, February 29, 2008
February 29th-a rare day
With it being the last day of the month and leap year at that, I thought I would write a quick blurb about the week and what I have noticed.
Trucks are beginning to demand more money to haul the same loads than they have in the past six months. Is this because of the higher fuel prices or is it because it is the last week of the month? Trucks traditionally become scarce during the last week of the month as freight picks up with shippers trying to get everything they can off of their dock and out of their inventory. If the demand for higher rates continues, it could begin to create a disparity in the market with some customers continuing to pay lower rates and others paying higher rates, but it should eventually level out.
Economic indicators continue to be bleak with concerns over inflation and stagflation. Citizens should receive their checks from the economic stimulus plan sometime in May, giving everyone a chance to spend it on vacation or Spring spruce-ups around the house. Will it be enough to revive our sagging economy? Will it help jump start more business in the transportation industry?
The company I work for is hell bent on growing, which is a good goal. A company never wants to get smaller or back up if at all possible. And we have been fighting the good fight, battling with the oodle of other brokers/logistics companies out there, using lower rates as one of the primary weapons. For the past year, service has not been an issue. Everyone has been able to find trucks and it has been a struggle for everyone to try and capture new business, making relationships critical as competitors call on our customers every day. In a way, I'll be glad when business picks up and we aren't in such a price driven market. Maybe some of these people I have been making sales calls on will finally give us a chance to handle their business.
Yours truly....the Transportation Peddler
Trucks are beginning to demand more money to haul the same loads than they have in the past six months. Is this because of the higher fuel prices or is it because it is the last week of the month? Trucks traditionally become scarce during the last week of the month as freight picks up with shippers trying to get everything they can off of their dock and out of their inventory. If the demand for higher rates continues, it could begin to create a disparity in the market with some customers continuing to pay lower rates and others paying higher rates, but it should eventually level out.
Economic indicators continue to be bleak with concerns over inflation and stagflation. Citizens should receive their checks from the economic stimulus plan sometime in May, giving everyone a chance to spend it on vacation or Spring spruce-ups around the house. Will it be enough to revive our sagging economy? Will it help jump start more business in the transportation industry?
The company I work for is hell bent on growing, which is a good goal. A company never wants to get smaller or back up if at all possible. And we have been fighting the good fight, battling with the oodle of other brokers/logistics companies out there, using lower rates as one of the primary weapons. For the past year, service has not been an issue. Everyone has been able to find trucks and it has been a struggle for everyone to try and capture new business, making relationships critical as competitors call on our customers every day. In a way, I'll be glad when business picks up and we aren't in such a price driven market. Maybe some of these people I have been making sales calls on will finally give us a chance to handle their business.
Yours truly....the Transportation Peddler
Tuesday, February 26, 2008
Update on Market Climate
I receive a regular report from Morgan Stanley listing a Truckload Freight Index and according to the information provided on the report, truckload carriers are not doing enough to take truck capacity out of the equation to bring supply and demand closer together. Trucking companies are still purchasing new trucks to replace their older models, (they held off on doing this in 2007 because of emission standards being changed). It appears most carriers are in a Catch 22 situation, trying to gain incremental revenue by not reducing capacity. If capacity is not voluntarily reduced by the carriers, the market will correct itself when companies begin to go out of business.
This report takes me back to my previous post-higher fuel prices will cause carriers to change their strategy in the marketplace. We are seeing the continued corrections in the residential construction market and financial market. Freight rates have dropped tremendously due to competition for market share-the correction in the trucking industry will involve trucking companies going under unless the economy makes a quick U-turn. The problem is, we don't have a GPS to tell us when to turn, where we are and where we are going.
This report takes me back to my previous post-higher fuel prices will cause carriers to change their strategy in the marketplace. We are seeing the continued corrections in the residential construction market and financial market. Freight rates have dropped tremendously due to competition for market share-the correction in the trucking industry will involve trucking companies going under unless the economy makes a quick U-turn. The problem is, we don't have a GPS to tell us when to turn, where we are and where we are going.
Monday, February 25, 2008
Higher Diesel Fuel Prices
Each week the Department of Energy releases a report showing the National Average price of diesel fuel as well as showing the average price in different regions throughout the country. The California region consistently leads the average among the regions with their strict emission standards and taxes included in the price of diesel at the pump and this weeks jump in diesel prices is causing a stir among the trucking companies that travel to and from California. We are experiencing multiple California carriers requesting rate increases due to the sudden spike in diesel prices and they are doing this for a good reason.
Trucking companies have already felt the pinch of lower rates due to excess truck capacity and the freight recession that has been in play for the past year and I believe they are about to cry "Uncle" with the recent climb in diesel prices. The National Average price of diesel is reaching levels that will affect freight rates, despite the fact that almost every customer pays a fuel surcharge.
Sure the fuel surcharge is intended to compensate the truck for higher fuel costs, but it only pays for the miles the truck is hauling the freight and doesn't take into account any deadhead miles the truck might face before picking up the load or after delivering the load. These are the miles that eat into any profit made on the load in the first place and the expense for the deadhead miles is difficult to recover, and it makes the dispatcher/driver manager's job that much more important. Too many deadhead miles and the truck is losing money no matter how much the load pays.
Will the higher fuel costs turn the tide on rate reductions??? Only time will tell. But if fuel prices continue to go up, I believe trucks will become more selective about the loads they haul and begin to demand higher rates.
Trucking companies have already felt the pinch of lower rates due to excess truck capacity and the freight recession that has been in play for the past year and I believe they are about to cry "Uncle" with the recent climb in diesel prices. The National Average price of diesel is reaching levels that will affect freight rates, despite the fact that almost every customer pays a fuel surcharge.
Sure the fuel surcharge is intended to compensate the truck for higher fuel costs, but it only pays for the miles the truck is hauling the freight and doesn't take into account any deadhead miles the truck might face before picking up the load or after delivering the load. These are the miles that eat into any profit made on the load in the first place and the expense for the deadhead miles is difficult to recover, and it makes the dispatcher/driver manager's job that much more important. Too many deadhead miles and the truck is losing money no matter how much the load pays.
Will the higher fuel costs turn the tide on rate reductions??? Only time will tell. But if fuel prices continue to go up, I believe trucks will become more selective about the loads they haul and begin to demand higher rates.
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