For years shippers have held the upper hand at the negotiation table. This has led carriers to focus on reducing rates, while at the same time working to improve service. However, the pendulum as now swung in favor of the carriers, leaving some shippers flat-footed. Three significant trends will keep the carriers in the driver's seat:
Demand: while somewhat anemic, the demand for transportation has been increasing. Some estimates of economic growth are in the 2 percent to 3 percent range, while the fourth quarter of 2014 is expected to be above 3 percent. Any increase is new demand, placing added pressure and driving costs higher.
Drivers: The long awaited and forecasted driver shortage is finally upon us. The pool of available drivers is shrinking; an ATA study reported that 37 percent of carriers point to the pending retirement of drivers as the most immediate threat to the national driver pool. As the economy grows, potential drivers will move to other industries, such as construction. Salaries and bonuses will only go so far in recruiting drivers. Much has to do with how our society values drivers. After all, how many of us want our children or family members to grow up and be a truck driver?
Darn government: If you like legislation, you should love the government in 2015. Hours of service rules are being re-written. CSA is rolling out, as are electronic on-board recorders (by 2017). As daunting as these may be, the more concerning issue is the government’s predilection for additional regulation. Carbon tax anyone?
It doesn't stop there; everyone is experiencing the crumbling interstate infrastructure, resulting in delays. While intermodal moves are taking freight off the highways, it is debatable as to how much capacity they can actually absorb.
Add up the 3 D’s and you start getting a better idea as to why carriers are asking for – and getting – rate increases. The cumulative impact of regulatory changes, lost productivity due to the changes in the Hours of Service and increased equipment costs due to electronic on-board logs is estimated at 17 percent.
Not all is lost. In fact, this could be the perfect time for forward-thinking shippers and carriers to work together. Perhaps this is the catalyst to get carriers and shippers to quit thinking as transportation as a commodity and a transaction, and work together to reduce waste in their channels. Let’s hope 2015 will be the year where we don't talk about collaboration, but do it.
Timely, incisive articles delivered directly to your inbox.