DC Velocity - March 2018

T ra ns p ort a t io n R ep or t

It’s Simple Math

Pickers Travel Less = You Save Money

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Comparison

Path Optimization 305.2 feet - 33.3%

Location Sequence 457.7 feet 0.0%

Pick Location
Pick Path
AA
AA

Barnes, who bid out large volumes when he ran the multimodal unit of the former Con-way Inc., said he would insist on contracts beyond one year and do relatively frequent “surgical bids,” another name for mini-bids, within the contract’s time window.

CHANGE THE GAME

No matter the size of the bid, ship-
pers would be wise in this environ-
ment not to delay putting them
out, according to Michael T. Regan,
founder of consultancy Tranzact
Technologies Inc. Many shippers
have delayed their bids to see if
the market quiets down, Regan said.

However, such a move is potentially disastrous because truck pricing and capacity have entered an “ unprecedented” upcycle that could last at least a year and perhaps longer, said Regan, who has been around the industry for decades.

Not surprisingly, he is advising clients
to get their bids out sooner rather than
later.

Regan and Barnes also bemoan the growing influence of procurement managers in bid preparation. Procurement folk, they said, view transport as a pure commodity where the lowest cost rules. In addition, procurement managers lack the awareness of logisticians of how to extract sustainable value out of their transport spend, they said.

Barnes said that many shippers, particularly big companies with large volumes, have a pattern, especially in periods of abundant capacity, of demanding double-digit rate cuts only to discover their service levels worsen as a result. Putting such a squeeze on carriers is unlikely to succeed in today’s climate and will come back to bite shippers even if they could get the upper hand on prices, Barnes said.

“Short-term thinking gives you medi-
um- to long-term pain, and people don’t
realize that,” he said.

In theory, everyone says they want rate and capacity stability. In practice, though, shippers have budget targets, while carriers have rising costs and a once-every-dozen-years-or-so profit opportunity. Something has to give, according to Cubitt. “Even those who work toward a stable environment can’t figure out how to get it,” he said.

Tucker said the key for shippers and brokers is to recognize the lanes carriers want to play in and feed them enough good freight to make the game profitable. Shippers must realize that carriers and brokers will be reluctant to lock in prices unless the lane awards make good financial and operational sense, he said.