Changing landscape

Changing landscape

The economy has produced many changes besides the visible gas prices and the housing and banking debacle. In the overall transportation and logistics landscape, subtle and not-so-subtle changes are occurring that I think will have a long-term effect on many service providers, on their ability to compete, and on their bottom line. And this, of course, has a spillover effect on cargo interests.

As an example, the decline in imports into the U.S. has affected motor carriers and railroads in similar yet different ways. In essence, there are roughly 10,000 fewer loads a week for truckers involved in any way in import freight. A great many of those loads also are moving by intermodal rail, so the downturn is a blow to both industries.

To the rails, this may have been a blessing in disguise; it gave them more time to work on their infrastructure, in need of major upgrading and modernization. The trucking industry also may have been helped in a slightly different way, by easing the driver shortage. Both industries, however, have taken a revenue hit, which is never a welcome outcome.

Truckers, more exposed to domestic economic woes, have begun to react dramatically as an industry. More companies are failing and falling by the wayside, and many others have serious financial problems. The latter are reacting, of course, by curtailing spending, especially in capital outlays for new equipment.

Reduced need for trucks equates to buying fewer pieces of equipment.

But another reaction is that many asset-based firms are looking at how they might "market" themselves differently. Most have delved into the non-asset-based aspects of the business in the past, but now more than a few are taking serious steps to become heavily involved in the non-asset side of the business.

This in turn will impact the traditional non-asset-based industry -- less overall volumes will be available because of the economy, less capacity will be available as less new equipment is being ordered, and asset-based firms will become more heavily involved in non-asset activities.

What does this mean to cargo interests? It may or may not have an effect; it depends on how they use the non-asset-based services today. Some consider it an easy way to find service -- sometimes at attractive rates, other times at not-so-attractive rates. The spot market is like that.

But what about the service aspects of the equation? Posting loads to an electronic bulletin board gets responses, but from whom? What do we know about the person or "carrier" who responded?

I've noted with some puzzlement that some brokers brag that they do business with thousands of motor carriers. That is likely helpful in getting someone to move a load, but with what level of service? And I can't logically accept the fact that the broker really knows those thousands of truckers.

So to a large degree, they are shooting in the dark when trying to match loads with service.

There is an element of the industry, however, that is adapting to their customers' needs as well as to the changing landscape of motor carriers. They are creating true professional relationships with both, by getting to know the shippers' needs and satisfying those with high-quality services with carriers they know. In doing so, they have created a "team" approach to fulfilling the shipper's expectations.

In the ever-changing world of transportation and logistics, and with today's economic conditions, adapting this approach to the market may be the only way to survive. The shippers have to consider the options -- do I use the one with high levels of service and reliability based on its close relationship with the fewer number of motor carriers, or do I use the one that markets its questionable relationships with anyone who has a truck?

It may seem oversimplified, but it isn't. Those are the decisions that cargo interests will face for quite some time, as the landscape of transportation and logistics continues to change.