hours of service. The rules, which were enforced starting
in July 2013, reduced a driver’s workweek and changed
drivers’ rest cycles. According to most estimates, they
have shaved between 3 and 5 percent off a typical carrier’s
available asset utilization. Peggy Dorf, an analyst at DAT,
said the network had trouble this past winter adjusting to
its first cold-weather cycle under the rules. She said the
rules should have less of an impact next winter because the
industry now has a year of experience working with them.
The growing influence of freight brokers has become
a key factor in driving up demand for and cost of space.
According to a recent survey of large shippers by Morgan
Stanley & Co., 37 percent used six or more brokers in June,
compared with 30 percent in June 2012. Shippers no doubt
are using more brokers in hopes of increasing their chances
of finding affordable capacity. However, this has resulted in
a growing number of potential buyers chasing a declining
pool of trucks. Rutkowski said she doesn’t see this trend
reversing any time soon.
Then there is old-fashioned capitalism. Like most
free-marketers, truckers sought to “make hay while the sun
shone,” or, in this case, as the snow fell and the ice formed.
With space at a premium and fat spot market rates beckoning, it would only be natural for carriers to migrate their
assets to the spot market or to tell their users their contracted capacity would need to be repriced. “Why should I move
freight for $1.35 a mile when I could get $2 a mile without
any trouble?” said Charles W. Clowdis Jr., managing director, transportation, at IHS Economics, a unit of consultancy
IHS Global Insight.
Shipper-carrier contracts generally contain language
committing the carrier only if equipment is available,
Clowdis said. This effectively gives the carrier an escape
hatch to shift rigs and trailers to the spot market and leave
the contracted shipper in the lurch, he said.
WHAT DOES THE FUTURE HOLD?
The prolonged nature of the current cycle, and the seemingly secular trends behind it, will be on everyone’s mind
as the bidding process for peak-season business gets under
way. Shippers have held the upper hand for most of the past
eight years as a subpar economy and truck oversupply left
carriers clamoring for business. That leverage is gone, and
with it any thought of shippers’ punishing their carriers for
purportedly bad behavior in early 2014. “Shippers cannot
afford to have a ‘retribution’ approach” anymore, said C.
Thomas Barnes, president of Con-way Multimodal, which
procures capacity for the Con-way companies as well as for
other users.
Barnes said that justice is finally being served on those
shippers who took advantage of the multiyear downturn
starting in 2006 to play carriers off against each other in an
effort to get the lowest price for their freight. “A lot of ship-
pers misbehaved between 2007 and 2009,” he said. Barnes
noted that trucking executives have warned for years that
shippers who stayed around during the bad times would
be rewarded when the pendulum swung, while those who,
in his words, “played the transactional game” could find
themselves without wheels.
Meanwhile, truck users are doing what they can to pro-
tect themselves. Con-way Multimodal and truckload giant
Werner Enterprises recently signed a three-year agreement
for Werner to supply the Con-way operating companies
with an adequate amount of assured capacity; the agree-
ment is an extension of previous compacts between the
two. Byrne said he is using TQL’s technology to provide
carriers with value-added benefits such as identifying
backhaul opportunities on various lanes. And shippers that
wouldn’t have even thought of it in the past are now asking
their carriers what they can do to make their freight more
“carrier-friendly.”
Clowdis of IHS said savvy shippers should see the turning
of the worm and give carriers what they want most: more
money. He added that in return for capacity assurance,
shippers should offer to pay a 20-percent premium over the
going rate. If the shipper’s loads fall below the agreed-upon
level, the shipper should compensate the carrier for the
difference, he said.
“In this environment, that is what a wise shipper would
do,” he said. N
