DC Velocity - March 2011

transportationreport TRUCKLOAD

He says it may take as long as two years for truckers to recoup higher expenses, unless something occurs to disrupt the current supply-demand equilibrium.

Cubitt says shippers now have a window to lock in attractive rates before capacity tightens again, freight demand takes off, and the effects of government regulations like the CSA 2010 driver safety initiative kick in. Cubitt also advises shippers not to expect new or renewal contracts to be extended for two years, noting that an agreement of that duration would create too much cost risk for carriers.

BUILDING BRIDGES

As shippers and carriers strap in for the next roller-coaster rate ride, the larger question facing the industry is how to inject stability into a business whose outlook is more uncertain than ever.

According to experts like Perry and Cubitt, an important step toward securing a better future is to recognize how the culture of the past has poisoned the well. For one thing, shipper-carrier contracts are considered informal documents with little force of law, they contend. It is easy for either side to exit the agreements, and it is common for one or the other to press for modifications to a contract should market conditions change.

Though a contract may prescribe specific rates, it usually
doesn’t require firm capacity commitments on the carrier’s
part, Cubitt says. In addition, truckload contracts don’t
penalize carriers for not delivering on capacity commit-
ments, he says. As a result, an unhappy shipper often has
just two options: to threaten to pull traffic from the carrier,
and to actually do it.

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