A Hint From Railroads

A Hint From Railroads

The trucking companies that succeed in the new decade may take lessons from their oldest competitors.

“They all need to look at the railroads,” said Satish Jindel, president of SJ Consulting Group in Pittsburgh. “They’ve always been critical of them, and considered them their enemies, but there’s a lot to learn from them.”

For one, the railroads “showed the greatest level of discipline in taking capacity out to maintain pricing,” Jindel said. Of course, that’s easier when you only have a handful of major competitors nationwide. But, he said, “It can be done.”

Shippers and carriers must shift their focus from pricing to profitability, Jindel said. “Shippers need to think about the total cost of transportation. While they may get slightly lower rates from certain carriers in certain segments, they will be compromising the importance of transportation to their customers and to their organization,” he said.

Among carriers, he pointed to less-than-truckload carrier Old Dominion Freight Line as a paragon of pricing discipline. “ODFL has strictly maintained they won’t compete on price, and they’ve let business slip because of it,” but mostly unprofitable business, he said.