Opinion: A Shipper's View

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By Greg Wells

i>Corporate Manager of Transportation

eneral Cable Corp.

Logistics professionals and regular readers of Transport Topics know the major issues to close out 2003: truckload market capacity and hours of service. Shippers, carriers and consignees alike face great uncertainty in the new year. No matter where you reside in the supply chain, you’ll have a full plate of worries going into the holidays.

Hours-of-service regulations for commercial vehicle drivers have garnered most of the spotlight lately. But many of us have to contend with truckload capacity, or the lack thereof.

There has been some debate in recent months regarding the existence of a truck shortage. Is it real or only perceived? From my company’s perspective, and to many other industry professionals I know, there is nothing to discuss. There is a truck shortage in the United States today.

Years of bankruptcies, mergers and acquisitions, and fleet downsizing have taken their toll. We’ve seen thousands of carriers fade from existence since 2000. Most were small to moderate-size carriers, the “mom and pop” truck lines whose demise hardly made the front page of their local papers. But in the aggregate, their loss is felt immensely.

Those resources are sorely missed as the economy begins to strengthen. Demand surged this summer in the truckload sector and suddenly the truckload market was out of equilibrium. By the end of the third quarter, demand far outpaced supply. As Scott Arves of Schneider National aptly summarized in TT’s Dec. 2 Hours-of-Service online chat session, “The industry is facing capacity constraints like it has not seen in over a decade.”

That may be an understatement for flatbed services. The second half of 2003 will long be remembered in our company as one of the worst truckload markets in recent history, maybe the worst. Despite our efforts to secure more capacity, we consistently experienced truck shortages. Some plants experienced regional bidding wars to cover loads.

Unfortunately, the outlook isn’t promising. As the economy rebounds we don’t see too many carriers gearing up. Faced with rising costs and the threat of lost productivity, most carriers are in a holding pattern. Most major carriers are predicting very conservative growth in 2004, despite economic indicators that show more freight is available. That spells trouble.

Fuel costs, engine mandates, workers’ comp and other insurance, security, hours of service — the barrage seems endless. And there’s that pesky matter of driver recruitment and retention. Our nation’s carriers have taken a series of body punches that make it prudent to play defense and weather the storm.

And why not? Unless the economy takes a nosedive, supply and demand are on the carriers’ side. With everything they have endured the past few years, and now the federal government piling on, I’m sure the carriers find it refreshing to be in the proverbial driver’s seat. In their defense, it’s hard not to be opportunistic.

Shippers may gain a false sense of relief as demand curtails during the winter, bringing supply back to equilibrium. I wouldn’t recommend getting too comfortable. The truckload capacity crisis is not dead; it’s just hibernating for the winter.

Come next summer we’ll be back to the daily bidding wars, reducing profits for those that get trucks and delaying customer shipments for those that don’t.

In the spirit of the holidays, I have a wish list:

Logistics professionals should voice their concerns to legislators and industry organizations. Congratulate our regulatory entities on a job well done, then kindly ask them to back off a little — give the carriers a chance to catch their breath. Sure, we all want safer highways and homeland security, but there are other issues that can wait without adversely affecting the health of the economy and the rate of its recovery.

Logistics professionals should strengthen their carrier partnerships. Many of us talk “partnership” but lack the follow-through. (I stand guilty as charged.) Evaluate your sourcing strategy, and then take appropriate measures to better lock in capacity and ensure service. Share business forecasts with your carriers and tell them what role you need them to play in your supply chain. Ask them to help you identify carrier-adverse behaviors in your company, then take steps to minimize them.

Carriers should be reasonable with their pricing leverage. Yes, in a seller’s market it’s hard not to be opportunistic. But I hope they’re thinking long-term. Across-the-board rate increases, even for accessorials, will not encourage the change desired — why change if I have to pay anyway? Reward those that share data, invest in systems and improve their behavior. Penalize those that don’t. Only then will we truly improve supply chain efficiency, benefiting everyone for years to come.

General Cable Corp. of Highland Heights, Ky., manufactures wire and fiber cable for communications, energy transmission and general industry.

This story appeared in the combined Dec. 22 & 29 print edition of Transport Topics. Subscribe today.

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