Shippers and carriers are constantly influx with the economy, as well as with one another. In a perfect world, shippers and carriers would work hand-in-hand to create seamless goods distribution. The reality is that both sides are looking to keep their heads above water in recessions, and to expand their profits during the rise of an economy. Yet if shippers want to win the current battle with carriers, they are going to need to have a strategy involving the LTL market. Additionally, both shippers and carriers should rethink their relationship for the economic future so they are working in conjunction with each other.
Recession for Goods Distribution
As noted by Accenture, in 2011 the economy began to climb out of the recession, creating a power differential for carriers and shippers. Whereas 2009 saw the control of transportation industry profits in the hands of the shippers, two years later a shift occurred in the favor of carriers. This shift resulted from the reduced shipment volumes of the recession that forced carriers to streamline their transportation assets to save themselves from going under. At the same time customers wanted their goods shipped for less, partly due to the recession and partly due to the demand shippers had to move goods. Since this time carriers have moved into the driver’s seat of transportation by offering innovative shipping methods. The LTL market is one area where the shift is now in favor of carriers.
Economy Upturn for Shippers and Carriers
As the economic situation has improved, consumers and businesses have followed suit by increasing their shipping and receiving volumes. This is occurring across the board for every channel of transport from trucking to maritime. Due to the downsizing of carriers in the recession, however, shippers are finding fewer avenues for moving their shipments. Other factors creating stress for shippers include ever-increasing fuel costs and general shipping costs. The latter cost is a result of carriers being more selective in what they transport and for whom. While the shippers were the kingpins during the recession, carriers have the upper hand at the present time. Carriers as a whole have levied surcharges and increased rates for shippers.
Meeting in the Middle
Money and profit is the name of the game for both the shippers and the carriers. However, according to Inbound Logistics, there are certain rules and economics of the transportation industry that must be followed. Carriers should strive for a stable pricing structure, rather than dipping and climbing to follow the economic swings. The economy is a volatile one, as understood throughout history. Yet whenever carriers’ capacity exceeds the supply, the first thing they do is lower their prices. On the other side of the fence, shippers will try to go as low as possible with their transportation costs. In this case shippers are not looking at the big picture of carriers whom need to be recouped in terms of ROI. Instead of trying to outnumber one another, carriers and shippers should recognize their middle ground, that they are serving the self-interests in the economic situation of the supplier and the customer.
Leveling the Playing Field
For shippers to rise against the ebbs and tides of carriers’ charges, they need to reassure carriers that there will always be a need for their services. Carriers must be certain that the supply factor is not going to disappear. This means that shippers need to stick with carriers rather than shortcutting carriers due to cost fluctuations due to the economy. Sure, it can make financial sense to go with the cheaper carrier, but only for the short term. In order to establish a stable relationship with carriers, shippers have to build a platform of confidence and security for their carriers. As such, this involves going with the compensatory rate rather than bargaining for the lowest rate.
The Bottom Line for the LTL Market
As the US economy is looking positive in 2015 and for the next few years, so is the LTL market. For starters, the LTL markets are expanding exponentially, as noted by Transport Topics, due to outsourcing loads via third-party logistics (3PL) and brokers. Streamlining is key for shippers hoping to connect with carriers on a more even playing field. Rather than waiting for a full load for transport, carriers are utilizing LTLs with the benefit of brokers and 3PLs on their side. Shippers will need to rethink their shipment strategies, which should now include LTL shipments. Fortunately this means that deliveries are going to be more expedient, a win-win for shippers and receivers. However, shippers will be working with brokers and 3PLs more than ever before as carriers are becoming more receptive to the idea of outsourcing logistics.