Riding Out the Recovery
An ancient Chinese proverb states, “To be uncertain is to be uncomfortable.” After the recent economic turmoil, we can all appreciate the accuracy of that statement.
Although the Great Recession itself appears to be over, the feeling of uncertainty clearly isn’t. If anyone knew how the recovery will play out for the transportation and logistics sector, they could also predict the stock market— and are more likely to be relaxing on a tropical beach than worrying about the economy’s trials and tribulations.
Here’s a bet that any Las Vegas odds maker would cover: Business will be choppy for both shippers and carriers for a while. Trucks are scarce, and the driver shortage is even more challenging. Some of us remember the summer of 2006, when capacity was tight due to adverse driver demographics. The baby boomer driver phenomenon is the same as it was in 2006— except those same drivers are four years older, and a lot poorer.
At the same time, increased load volumes have tightened capacity. The full change in the post-recession cycle from excess capacity to tight capacity won’t be complete until enough loads go uncovered on a broader scale. More shippers are making “open checkbook” load offers.
Meanwhile, some analysts are causing concern with talk of a potential “dead cat bounce” as it relates to the recent increase in non-service sector GDP and trucking. Some trucking experts opine that extended unemployment checks and initial generosity with government stimulus money may have caused the surge in truckload volume, which, as a result, is nothing more than a sugar high. At the same time, diesel and CSA 2010 are wild cards. The reality is, no one has a clue what’s on the horizon.
Size Matters
Here’s what we do know: big shippers tied up rates and capacity during the end of the recent economic downturn. They had the ability to get commitments last year and early this year in anticipation of a rebound.
But what about the small to medium-sized shipper who can’t stroke a multimillion dollar check for transportation management technology and the talent needed to pay off the investment? Remember how unforgiving the CFOs of those companies were to their logistics staff when fuel prices rose to unprecedented levels? This time the CEOs and CMOs will blame logistics for an inability to compete with larger companies or meet client expectations.
There are no perfect options for small to medium-sized shippers. But one strategy that works during tough times is for shippers to partner with transportation companies that have the carrier relationships, people, processes, and technology to manage their transportation needs.
For example, one shipper was struggling with transportation inefficiencies and high costs. Managers faced the choice of investing heavily in software and personnel, or outsourcing transport management to an experienced provider. The company chose to outsource, and the provider delivered cost savings, visibility, and carrier capacity. That decision also allowed the company’s employees to focus on their core competencies and meet their business goals. That’s good news in any economy.
Navigating today’s post-recessionary environment will continue to challenge all of us. The best course of action is to look carefully at all options and invest in the future wherever possible. We’ll ride out this storm together, however we get there.