Trucking Perspectives 2006: IL's Motor Freight Market Insight Survey

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Anyone who has spent time traversing U.S. highways and byways recently has likely witnessed firsthand some of the challenges facing domestic shippers and carriers: security delays at border crossings, infrastructure improvement projects that bottleneck traffic, and gas stations spinning prices like rental car odometers.

Capacity and cost constraints as a result of high fuel prices, urban congestion, aging infrastructure, and a diminishing pool of qualified drivers raise discernible speed bumps for shippers and carriers as they look to rev up their transportation and distribution operations.

Less conspicuous, yet equally telling, are signs that the motor freight industry is mapping a better course for the future—packing more freight, and picking up velocity along the way.

In the Midwest, biodiesel blends are fast becoming a common sight at truck-stop pumps, with drivers citing better fuel economy and smoother operational characteristics as a result. Soon-to-be-mandated reduced emissions vehicles are equally visible.

Along Interstate 80 in Wyoming, evidence of intermodalism is overt: double-stacked containers flow along Union Pacific's adjacent rail line while tractor-pulled container rigs scream to and from intermodal hubs such as Omaha, Des Moines, and Chicago.

Innovative communication and visibility technologies are helping shippers and their carriers interface effectively across modes and supply chains. For trucking companies specifically, drivers are now empowered to follow direct routes, become more fuel efficient, and avoid congested chokepoints as well as capture and convey important shipment information in real time.

These trend lines—good and bad—impact carriers and shippers alike and reflect the increasing complexity of the U.S. motor freight market. In the face of adversity, carriers are emboldened by competitive self-interests to drive greater value for their customers—by no means an easy task. Then again, neither is benchmarking, selecting, and managing a pool of carriers.

To help shippers and consignees navigate the twists and turns of an ever-shifting market, Inbound Logistics offers a one-two trucking information punch: our Motor Freight Market Insight Survey, and our annual Top 100 Motor Carriers list.

The Motor Freight Market Insight Survey provides in-depth coverage of the industry via two tracks: first, we look at the motor freight industry at large, polling carriers to see how they are investing in and evolving their services and coverage areas to better meet customer needs.

Second, IL solicited input from transportation buyers to gauge the challenges they face, as well as how they select and manage carriers to drive transportation and logistics innovation and best practices. Offering both perspectives presents a holistic panorama of the trucking industry from demand to supply, and all points in between.

The annual Top 100 Motor Carriers list serves as a resource for shippers looking to engage new carrier partners, as well as a benchmark for trucking companies that excel at what they do.

Transport buyers can use this integrated research as they look to break down walls between their customers and carriers, realign logistics processes, and create a more efficient supply chain network.

Carrier Perspectives: Shippers Ride Shotgun

Today's shippers aren't backseat riders when it comes to partnering with carriers. Their role, instead, is more accurately typified as riding shotgun.

While carriers provide the resources and equipment to transport product from point to point, shippers find it increasingly important to actively engage their freight partners and dictate protocol to protect and serve their best interests.

Their reckoning is well founded: any costs carriers or intermediaries assume as a result of fuel increases, insurance costs, or maintenance and operating expenses ultimately trickle down to shippers in one way or another. Inbound logistics practitioners know this already—by controlling freight movement from point of origin, they determine which carriers transport their cargo, holding them accountable to pre-determined service requirements, and thereby streamlining costs.

That carriers are embracing shipper interests and demands is clear from data gathered in our Motor Freight Market Insight Survey.

Nearly 80 percent of carrier respondents offer truckload services, with more than half providing LTL competencies. More intriguing, trucking companies are bulking up on value-added offerings: 66 percent of carriers provide logistics services; 59.6 percent offer dedicated contract carriage; 48.9 percent offer expedited; and 42.6 provide intermodal.

Finding capacity and hiring qualified drivers have been recurring problems for shippers and carriers over the past few years. Consequently, transport buyers are beginning to show signs of impatience with seasonal variability.

Soliciting assistance from carriers and third-party intermediaries, they are turning to intermodal solutions—particularly mixing road, rail, and barge services—to further reduce costs, while creating more flexible alternatives for accessing extra capacity.

In some industries, however, intermodal solutions are untenable, given time-to-market constraints and rigid lead times. Velocity-driven demands have compelled some businesses to seek dedicated contract carriage partnerships with carriers to secure capacity regardless of cost. Other alternatives include completely outsourcing fleet management and transportation competencies to 3PLs, or investing in a private fleet.

Technology Levels the Playing Field

Another area where carriers are extending their footprint to give shippers more bang for their buck is the implementation and integration of communication and data capture technologies.

Technology has leveled the playing field in the motor freight industry because, with minimal capital investment, smaller truckers can offer their customers visibility and tracking services comparable to large, vested carriers.

When it comes to communicating with truck drivers, 78.7 percent of carrier respondents use satellite text-based devices, 63.8 percent use cellular telephones, 36.2 percent utilize cellular text communication, and 14.9 percent rely on satellite voice capabilities.

For capturing data and tracking shipments, carriers overwhelmingly utilize satellite devices such as GPS units (74.5 percent), with cellular telephones (27.7 percent), bar codes (21.3 percent), and RFID (19.1 percent) rounding out the most widely used technologies.

Given the lack of wall-to-wall cellular coverage in the United States and the scale of carriers' operating areas, satellite-based devices promise the most reliable means of communicating information among truck drivers, shippers, and consignees. This gives carriers leverage conveying shipment alerts to customers per pre-determined parameters. Nearly 80 percent of responding carriers report sending shippers e-mail alerts to identify freight status.

In concert with capturing real-time shipment data during transit, carriers are using web portals to pool information for their customers. Nearly half of those surveyed provide pricing and routing information on their web sites; 73.5 percent offer logistics web tools such as advanced shipment notices, activity management reports, and online claims filing; and 87.8 percent offer online track and trace functionality.

Carriers, like many other supply chain constituents, are still lukewarm about RFID implementations, with only 12.2 percent of respondents providing RFID support at the SKU or pallet level, and only 26.5 percent considering it as a future initiative. By contrast, 63.3 percent of carriers can accommodate or plan to accommodate bar-code support for customers.

Shippers are similarly dictating the markets and regions carriers serve. Globalization continues to place additional pressures on inbound specifiers as they coordinate freight transportation within the United States, Canada, and Mexico.

Among carriers surveyed, 42.6 percent operate throughout North America, with 31.9 percent serving the United States and Canada only, 25.5 percent targeting only the United States, and 2.1 percent offering services to and from the United States and Mexico only.

Of the surveyed carriers who deliver within the United States only, 25.5 percent offer service nationwide, while 38.3 percent identify themselves as regional or multi-regional truckers.

The emergence of global truckers, spurred by growth in markets such as China, is another interesting trend occurring in the trucking industry. Large carriers such as Schneider and Yellow are capitalizing on their logistics divisions' penetration in Asia, and a dearth of qualified trucking companies in these markets, to take advantage of inbound control programs with existing customers and grow their business at point of origin.

While only 2 percent of surveyed carriers report offering international trucking coverage, as carriers spin off logistics divisions and follow customer leads back through the supply chain, this number will likely grow.

Shipper Perspectives: Know Your Carrier

The burden of rising transportation costs, coupled with the complexities of moving freight over the road, have given shippers one advantage. It has forced them to develop close ties with their carrier partners to drive collaboration and decisionmaking.

Among shippers polled in our Motor Freight Market Insight Survey, 70.1 percent acknowledge that their relationships with carriers are more important than their partnerships with brokers/intermediaries, suggesting that companies want a direct line of communication with trucking companies to better control the process. Other transport buyers give equal value to their contracts with carriers and brokers (21 percent)—particularly those that rely heavily on intermediaries to secure capacity—while only 7 percent value their broker more than their carrier.

Shippers collectively identify consistency—in terms of pricing, securing capacity, meeting customer service requirements, and communicating information between carriers and consignees—as the greatest challenge they face in managing truck services.

That said, transport buyers are more attuned now to their carriers' service performance, and if partners cannot meet expectations they are inclined to look elsewhere. Confirming this fact, nearly 37 percent of shippers polled acknowledged switching carriers recently.

Among the reasons they list for dropping carriers are:

  • Lack of delivery service and origin capacity.
  • Price too high for level of service provided.
  • Volume leveraging.
  • Damages.
  • Failure to fully explain missed commitments.

When asked what would be the "last straw" that might compel them to change partners, transport buyers cite failure to meet service requirements, poor customer service, repeated cargo damage, and reluctance to pay cargo claims as primary factors.

Interestingly, few shippers single out pricing as the main reason to switch carriers, which supports the reality that most shippers are resigned to paying more if service remains consistent and reliable.

Many businesses are expanding their carrier pools—directly or through outsourced partners—to access a greater critical mass of capacity as well as to leverage and negotiate pricing. Carriers still hold the upper hand given capacity constraints, but they are also mindful that shippers are more judicious in how they select and manage their partners.

With so many options available, it can be tough for shippers to find the best carrier(s) to meet their needs. IL survey respondents offer some valuable tips:

"Make sure you only pay for the level of service you require," advises one shipper. "There are many carriers out there, so without too much work, you should be able to find one that provides exactly the level of service you are looking for."

Other respondents recommend selecting carriers based on the type of commodity you ship, and working with partners that are proactive and have the end customer's best interests in mind. It is equally important to benchmark carriers and pre-screen them for their ability to meet specific selection criteria.

Shippers can also look strategically at where carriers operate to find high-volume lanes where carriers might need backhaul tonnage and perhaps offer price breaks, say transport buyers.

Ultimately, shippers that get to know their partners, ask appropriate questions, and find carriers with the right answers will have the opportunity to build relationships for the long haul.

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