Though truckers may have taken the initial hit, shippers are proving to be the long-term casualties of the "perfect storm" that rocked the industry a few years back. The trucking industry has now largely rebounded from the "storm," which arose from a confluence of rising fuel, insurance and equipment costs. Shippers, however, are still reeling.
Industry consolidation in the storm's aftermath altered the market dynamics. After years of what could best be described as a buyer's market, where trucks were in plentiful supply, the tables have turned. Today, demand for trucks far outstrips supply, which means truckers now have the upper hand. They can afford to be selective about whose freight they'll handle and what they'll charge. And shippers are adjusting to a very different reality.
To find out how shippers were coping with the trucking crisis, the Warehousing Education and Research Council (WERC) and DC VELOCITY conducted an online survey in the fall of 2005. What they found was that although shippers had indeed faced rate increases and equipment shortages, they had, for the most part, managed to mitigate the effects through improvements in their own operations. Even so, they weren't terribly optimistic about the future: More than half (53 percent) said they didn't expect to see much improvement over the next year.
In a follow-up survey this fall, WERC and DC VELOCITY found that, despite efforts to improve their own operations and increase collaboration with the carriers, shippers had seen very little in the way of progress. In fact, asked to compare the current environment against 2005, two-thirds (67 percent) of the respondents judged it to be the same or worse.
It's hard to argue with their perception. To begin with, it appears that the capacity crunch has yet to ease. A full 58 percent of the respondents to this year's survey reported experiencing difficulty finding equipment (compared to 53.5 percent last year).
Things weren't much better where pricing was concerned. A full 83 percent had experienced rate increases (the average increase was 5.9 percent). They also reported that chargebacks and accessorial charges had continued to rise, though at a much more measured pace than in 2004, when some accessorial charges increased by as much as 500 percent.
This much, at least, is clear. As long as the supplydemand balance is tipped in their favor, carriers will continue to call the shots. Shippers will remain at a disadvantage unless they step out of their comfort zone and make adjustments to their own operations.
And this year, they did. When asked if they had modified their warehouse operating procedures because of service issues, 74 percent replied in the affirmative. That's significantly higher than the 2005 percentage (48 percent).
But they haven't always taken the obvious steps, like starting up their own fleets or automating their operations. The survey found that only 27 percent of the respondents were running private fleets. And despite the clear-cut advantages of using transportation management systems (TMS) to help manage complex transportation operations, only 55.6 percent of the respondents said they were using these systems.
No one expects the climate to change anytime soon. Only 28 percent of the respondents expressed optimism that things would improve before the end of 2006. Many who have written on this subject have ended their thoughts with the prediction that it will be a while before things get back to normal. After almost three years of this, I am not sure what normal is or how we'll know it when we see it.
