to reduce engine and carbon emissions through new equipment, speed, and idling restrictions and bio-fuel require- ments are rampant. Trucking companies are answering the call voluntarily and through enforced compliance. Arguably, the business case for embrac- ing sustainability efforts, rationalizing fuel consumption, and reducing operat- ing expense has grown in importance as a result of, not in spite of, current mar- ket conditions. The Big Squeeze Shippers, too, have felt equal pres- sure to squeeze transportation out of their swelling expense reports and within shrinking budgets, placing an even greater burden on trucking part- ners. Abundant capacity has truckers cinching resources and stretching sales efforts, giving motor freight buyers the upper hand–for now. Shipper survey respondents over- whelmingly report that price (92 percent) trumps customer service (49 percent), reliability (47 percent), and coverage (44 percent) when evaluating trucking part- ners in today’s market–bringing to bear carrier sensitivity to competitive rate pressures. Capacity (20 percent) was the least-valued consideration. That shippers value price over cus- tomer service raises a key question: How do carriers who market their services and coverage superiority as a competi- tive advantage, and try to “sell” a higher price as a result, react to this new reality? Motor freight buyers are more willing now to sacrifice a day or three in transit, at a lower cost, as long as they and their customers know when shipments will arrive. Moreover, less service-sensitive carriers are gaining ground with ship- pers who can balance more time and fewer bells and whistles with improved economy. Customer service has slid down the totem pole of expectations because fail- ure is no longer an option–it’s a deal breaker. If transportation service provid- ers can’t consistently deliver on promise, there’s a fleet of suitors waiting in line
FIGURE 2. Trucking Services
81%
80
69%
67%
57% 55%
60
44% 44%
40
26%
24%
22%
19%
16%
20
9%
6%
Truckload (TL) cartage is most dominant among motor carriers, with 81 percent of survey respondents reporting this capability, compared to 55 percent who provide less-than-truckload (LTL) service – closely paralleling last year’s data. Shipper efforts to reduce more expensive LTL miles have made regional markets much more competitive in this segment, while long-haul trucking is increasingly under siege by more affordable rail/intermodal solutions. That said, the number of carriers offering intermodal services remains steady at 44 percent. One striking change from last year is a six-percent increase in motor freight carriers (67 percent) offering dedicated contract carriage (DCC) services. The cost and responsibility of operating private fleets in a down economy has likely swayed some companies to jettison their assets and rely on for-hire carriers, accounting for this niche growth. From a trucker perspective, DCC business tends to be very profitable. Secondly, the “dedicated” service that carriers provide, and charge dearly for, is often nothing more than their standard offering packaged differently.
capacity softness, driver-related outlay is of least concern, registering with only 27 percent of the survey pool. Trucking companies have been challenged to optimize fleet use and maximize loads to match shrinking pipeline volumes. Beyond tactical mea- sures addressing their own asset-heavy efficiency improvements, many are embracing logistics services to organi- cally sow and grow shipper partnerships and enhance their value. In light of the economy, some have begun operating “3PLight,” mining new opportunities to expand their core freight capabilities
and value proposition outside the truck- ing space. After cost-related concerns, 32 percent of carriers report technology investment as the next-greatest challenge, indicating they are exploring ways to enhance their value to customers through the lens of communication and visibility solutions. Dovetailing with customer demand for IT capabilities that deliver greater cost economy and supply chain transpar- ency, more than one-quarter of surveyed truckers (26 percent) are feeling the pull of green mandates from both consumers and government. Regulatory measures
52 Inbound Logistics • September 2009
FACING LOGISTICS CHALLENGES? USE IL’S 3PL EXPERTS AND
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