Transportation Management News — March, 2009

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Back to the Future for Shipper-Carrier Relations
Expect shipper-carrier relations in 2009 to take a more shipper-centric shape with the shippers dictating the terms. While this is probably not the best long-term strategy, short-term cost pressures will drive many shippers to behave as if this is 1999 and not 2009.
Transportation, like all businesses, is cyclical. Demand and supply are always in flux and, therefore, so are the relationships between shippers and carriers. During times of excess supply--as was the case in the late 1990's--shippers tend to dictate the terms of relationships. Likewise, when demand exceeds supply, as happened from 2004 to 2006, carriers will be very selective of their customers while shippers will try to make their freight more "carrier-friendly" to attract capacity.
However, this simple fact of business is often conveniently forgotten during an extended or severe peak or valley. When one side has the advantage, it tends to overplay its hand. Carriers will demand surcharges for services during peak demand while shippers will look for extreme price cuts during periods of oversupply. Both parties seem to forget that the cycle will turn and that their short-term actions will be remembered during the next turn of the cycle. And so, where are we for 2009? The cycle has taken the full turn away from the carrier-friendly days of 2004 - 2006 to the point where shippers will think they can party like1999 when it comes to carrier relations. This will manifest itself in three ways in 2009.
First, there will be more bids. Most manufacturers, retailers and wholesalers had their transportation budgets totally blown to pieces...
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Air Cargo Industry in "Global Crisis"
Two newly-published sets of air transport industry indicators confirm that the slump in worldwide demand for air cargo capacity towards the end of last year has continued into 2009. The International Air Transport Association (IATA) revealed that what it called an "alarming collapse" in cargo markets during December 2008 had worsened in January this year, with a 23.2% year-on-year demand drop. That compared with a 22.6% fall in December. January was the eighth consecutive month of contraction for IATA freight traffic.
"Alarm bells are ringing everywhere. Every region's carriers are reporting big drops in cargo... The industry is in a global crisis and we have not yet seen the bottom," said Giovanni Bisignani, IATA's Director General and CEO.
European carriers saw output fall by 23% whilst North American carriers recorded a 19.3% drop. However, Asia Pacific carriers, representing 43% of the market, led the cargo decline with a 28.1% year-on-year drop.
The dire position of the Asia Pacific air cargo sector highlighted by IATA is reinforced by a different set of figures just released by the Association of Asia Pacific Airlines (AAPA). On its index, that organization said total freight tonne kilometers (FTKs) recorded by its members in January this year were...
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An Integral Part of the Supply chain, a TMS Can Reduce Costs
The focus on collaboration and visibility across internal and external departments has clearly provided the Best-in-Class transportation companies with the flexibility and agility necessary to overcome the rising costs in fuel and other shipping costs.
Optimizing transportation management in any organization is getting more difficult with the seemingly daily change in the price of oil. Only a few months ago the price per barrel was skyrocketing out of control; only to see it settle below the lowest levels of the previous 24 months. Does that mean the oil crisis is over and we can go back to operating as we have in the past? Not likely and many economists view this as a calm before the inevitable rise in the price of oil to a level where it will stay for a very long time. The manual processes that once thrived in the stagnant pace of change in transportation costs are no longer adequate to keep up with today's decision-making requirements. Even though solutions have added functionality and deployment options to suit a wide range of business categories, only 39 percent of companies surveyed are...
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In a Word, 2009 Will Be Uncertain
In June 2008, ARC Advisory Group conducted a web survey of 16 leading transportation management systems vendors to obtain their views on growth opportunities and market conditions. Almost 70 percent said their year-to-date sales and pipelines were larger than in 2007. This is not surprising when you consider the record fuel prices customers were dealing with at the start of the year (fuel prices had risen about 50 percent in less than a year). This led many companies to focus on transportation spend management, which led to continued investments in TMS. Then the economy stumbled.
What will happen to the TMS market in 2009? First, the good news: the TMS market continues to exceed ARC's expectations. As reported in our recently published Transportation Management Systems Worldwide Outlook study, the TMS market grew almost 10 percent in 2007 to almost $1.2bn. Last year should end on a positive note as well when all the figures are in, and the long-term outlook for the TMS market remains positive. ARC forecasts the market to reach...
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Transportation Data Becomes 'Golden Nugget'
Transportation Management Systems that enable the collaborative sharing of data throughout the enterprise are leading companies to view transportation information as a 'golden nugget' of value creation, says Beth Enslow, senior vice president for supply chain risk at Marsh Inc. Enslow explains why eight out of nine TMS users are now outside the transportation department....
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Distributor Opts for Routing Software to End Inefficiencies
The Eastern Bag and Paper Group distributes commercial paper products, as well as cleaning supplies, healthcare products, and food service products, throughout the northeastern United States. From its four locations, the company's fleet of 75 trucks covers 65 routes daily to serve more than 9,000 customers, ranging from small shops to large companies. In addition, Eastern Bag has a division, Distributor Supply Corporation that delivers these same products to redistributors.
Until recently, the company used a combination of separate paper-based routing, GPS navigation, and cell phone communication components to accomplish...
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Past Transportation Management News Issues:
January, 2009
October, 2008

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