Tuesday, May 11, 2010

Controlling Transportation Costs

In order for shippers to control transportation costs, we thought we may help with some possible strategies. Of course, each shipper is different. Each shipper will have to consider many factors with methods to insure they get their shipments delivered in a timely manner during the current trucking capacity crunch.




Where Are We Today?

Currently, controlling transportation costs has been next to impossible with the current trucking capacity crunch. This loss of supply has been due to the many companies that have closed their doors or sold off un-utilized trucks during the recent recession. While many larger companies are starting to finally stop the losses, it is estimated that many smaller carriers are still in danger of losing their business. There is still a lot of uncertainty concerning the new safety regulations - many estimates are that over 175,000 truckers will no longer be eligible to drive once the new regulations take effect. See last week's blog article for more.




The Shipper's Perspective



Manufacturing is growing and has been expanding now for over 8 straight months - it looks like things are moving forward. This expanding along with the loss of trucking capacity (especially flatbeds and stepdecks) has created an environment where most shippers are being forced to "bid for trucks". This is not pleasant and most traffic managers are doing overtime to get loads moved.




What Can Shippers Do to Attract Trucks?



The market is going to demand that rates will be increasing (they already have been). There is little that anyone is going to be able to do to prevent the uptick in pricing just as no one could seem to keep pricing from going down during the recession.


Here are some "non-rate" items that shippers can do to attract trucks - especially if the rates are similar to the competition (competition is anyone taking your trucks from you!):

  • Make Your Facility "Trucker Friendly" - drivers appreciate the little things that make them feel welcome - clean restrooms, coffee pot, inexpensive snacks;


  • Improve systems for loading and unloading. - Time is money. If carriers are consistently delayed either loading or unloading, they will more than likely choose to go to a facility that does not delay. Detention is never the goal to collect an additional $100-200. Carriers and drivers are paid when the truck is moving, not sitting.


  • Be Flexible - Do You REALLY need a flatbed?? Flatbeds and stepdecks are the trucks that are the most affected by the capacity crunch. Can you make some minor changes and utilize vans? Vans, while still affected by capacity, are more abundant and you can possibly have your items shipped for lower rates than the flats.


  • Does the Load REALLY need to be tarped?? Drivers prefer to take loads that do not require tarping. Tarps can weigh 100 pounds and typically take 2 tarps to cover the typical load. Imagine if you had to lift 100 pounds of hard to work with material over your head - it can get old after a while. We're not advocating you take chances on cargo claims, but if a load really doesn't need to be tarped you may be more successful in moving it versus a load that does require tarping.


  • Offer "windows" to pick up loads versus strict appointments - flexibility in pickup and delivery times can make it easier for carriers to put trucks into your area. When they can "work them in", the freight is more valuable to the carrier and you may not have to pay as much as strict appointment freight.


  • Try to be understanding if a truck is not able to make your pickup or delivery parameters - We all understand that everyone has customers, and sometimes customers can be a little demanding (anyone ever heard of JIT?). It may go a long way for shippers to make an attempt to educate their customers concerning some potential issues with the current capacity crunch. Carriers need to do their best to communicate problems to their customers, but being delayed at other shippers can sometimes not be avoided. Trucks are getting older due to the financing squeeze put on carriers - they can't buy new trucks yet. There are going to be more truck break downs. If a transportation manager screams at a poor load planner if a truck is delayed, sooner or later that planner will make a decision to load with someone else. Not trying to excuse lack of performance - just trying to educate on the reality of the current truck supply;



Summary

We hope that this blog post will help transportation managers and company executives not only to understand the current trucking environment, but also to minimize their rate increase exposure.

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