Tuesday, September 8, 2009

Will Your Trucking Company Be There For You....

August 2009 - The Month Our Economy Stopped Declining and Started Growing

Our economy has already been gaining momentum, as proven by the index below, and last weeks article The Recession is Over.... Here's more proof on the economy, then we'll get back to what it is going to mean for transportation.

Nationwide, the ISM Manufacturing Index went above 50 for the first time since June 2007, when it was also at 52.9. An index score of 50 indicates that manufacturing is neither declining or advancing.

Here is the trend for the past 12 months:

The below report is back from May, 2009. This explains the ISM Manufacturing Index and the excitement that was actually being generated back in May.

So Why The Concern About Transportation?? Shouldn't this be GOOD NEWS for all companies???

In a recent interview with Schilli Transportation President and CEO, Thomas R. Schilli, it was explained what has been going on in the trucking industry and what WILL be going on in the industry.

According to Mr. Schilli, who has over 40 years of experience running Schilli Transportation Services, the past 18 months have seen record number of trucking companies filing for bankruptcy and many totally closing down. "Many of those trucks have been exported to Europe and the former Soviet Union and are not just sitting around waiting for that call to come back into action. In other words, our supply of trucks has diminished due to the past economic conditions."

Mr. Schilli went on to explain that while new trucks can be built, all business are facing a problem with business loans. "The only two types of companies that are going to be able to provide capital to purchase more equipment are the publicly held companies (they can acquire equity financing through stocks and other equity means) and companies that have stockpiled cash. The latter is going to be a little short in supply, again due to the economy."

The majority of trucking companies are going to be doing everything that they can to hold on to the assets that they have. The problem with this, of course, is trucks don't last forever. There are going to be more truck break downs and more possible service issues related to truck break downs.

Until our banking industry will take favor upon transportation companies once again, this is going to mean that the number of trucks is not going to be able to keep up with the demand that our economy is starting to produce.

What Does This Mean to Manufacturers and All Other Companies?

Be Prepared for upcoming price increases and difficulty of finding available trucks.

So what can the wise transporation manager do NOW to protect themselves??? Mr. Schilli recommends to all shippers that they may want to think twice about taking the lowest bidder and developing systems around the lowest-priced provider today. "That type of thought is likely to become extremely problematic in the very near future. It would be best for shippers to make deals with transportation companies now to lock in lower rates today and hedge their positions for the future." Mr. Schilli goes on, "Companies will end up negotiating higher rates than the last few months, but they will not only save money in the future, but they will also maintain their capacity".

Smart Transportation Managers should be thinking of their strategies now and making sure to take care of the carriers who they have been dealing with and would like to deal with, before those carriers start going where the trail of higher rates leads them in the months ahead!!


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