February 2014 | Commentary | Viewpoint

How the Changing Chassis Market Affects Your Supply Chain

Tags: Trucking, Ports, Intermodal, Transportation

T.J. Coveyou is Co-Founder and CEO, Chassisfinder.com, 949-933-3022

The change in marine chassis provisioning continues to be of concern to maritime shippers, thanks to a long-term trend of separating ocean transportation from inland logistics. That trend began in the mid-2000s, when carriers limited the inland destinations they would serve.

As ocean carriers are disintermediated from the market, chassis users and providers will develop direct commercial relationships. This means chassis providers will need to make the major shift from having a handful of customers on long-term contracts to having thousands of customers on short contracts, some lasting only one day. This major change requires new systems, processes, and skill sets.

The market will see a distinct separation of the roles of chassis provider and pool manager. The chassis provider will benefit from possession of the asset, and maintain a commercial relationship with the end user. The pool manager becomes an important partner, providing the chassis owner with a local footprint.

Transparency and cost allocation are major drivers of ocean carriers' divestment of chassis. As the cost of a chassis becomes more visible, and is paid for more directly by the end user, transparency and yield management grow more important. The industry is already seeing this with the confusion surrounding simple invoicing.

The issue becomes increasingly complex as all players in the supply chain start viewing chassis management as a differentiator, either through efficient cost control or revenue opportunity. Transparency and forecasting are key to chassis management, and new technologies and tools are already coming to market to satisfy these needs.

As chassis become managed like any other resource, a robust spot and short-term leasing market will develop, which enables users to flex their equipment costs based on demand. This market segment will be particularly robust when it comes to specialized equipment. Truckers don't need to keep expensive tri-axle or upgraded chassis in inventory in anticipation of needing the unit. They can offer more flexible and specialized services while keeping costs low.

The most significant long-term effect of this change is that warehouses and distribution centers need to change their planning models dramatically. When the cost of a chassis is accounted for, storing cargo in mounted containers becomes expensive. Warehouses need proper workload planning to reduce dwell time, perhaps shifting to live unload models.

The shift from a drop/pick operational model to live appointments is significant. It not only impacts planning and labor, but also makes the most favorable yard/door/floor ratios look very different.

Leaders Will Emerge

Ultimately, the chassis market will become like many others, where the most successful providers compete externally with superior service, the best locations, and quality equipment. Users can leverage advanced systems and processes to ensure they create value from the chassis they use.

Innovative companies are already applying new tools and systems to remain ahead of the pack. With the rapid changes in the chassis market, companies must consider and invest in chassis management to remain leaders in their industries.