The Future of Carrier Rates for Flatbed Transportation
Posted on Mon, May 10, 2010 @ 10:47
There may have been no more challenging a period in trucking than what we face in 2010 and beyond. As previously discussed, a great deal of capacity has been eliminated over the past 18 months. Much of it is not coming back. The regulatory pressures of CSA 2010 promise to further exacerbate this problem by contributing to an already burgeoning driver shortage.
Rates (and along with them driver wages) have been driven down by seemingly savvy shippers during the economic downturn which will only serve to stoke the perfect storm forming on the horizon.
Self-serving carriers have undercut their competition in the misguided assumption that any rate is better than no freight at all. Carriers need to get a moderate return on their investment. Those who under-priced their services are not long for this world.
Shippers now face the reality of steep rate increases in order to ensure sufficient capacity to move their product. The second-tier carriers who were willing to cut their rates in order to obtain their freight will be unable to supply trucks. Worse still, the trucks and drivers they do supply will be substandard. Carriers who accept less-than-market rates have to cut somewhere… maintenance and safety are usually the first casualties.
Regulations restrict the hours a truck can operate. Shippers will need to stop “talking” about being carrier-friendly and become carrier-friendly. No more can trucks afford to sit for hours at the shippers’ dock or their vendors’ dock. Trucks will be diverted to shippers who can get them loaded in a timely manner and ensure the carrier (and driver) can maximize their available hours thus providing a return on investment.
Carriers who cut rates to ensure cash flow (or for whatever reason) will now need to pay the piper. We’ve “trained” West Coast shippers by taking $1.00/mile freight for years. Why would the rates ever go up if we continue to haul their freight for less than it costs to run a truck? Is any rate really better than no freight (deadheading) in the short or long term? We’ve hurt ourselves in the past. It’s time to stop this self-destructive behavior.
The FMCSA is tasked with getting unsafe carriers off the roads. CSA 2010 is their latest and greatest tool to do so. So why are all these fly-by-night and renegade carriers still out there undercutting rates? I suspect the number of carriers who have gone out of business (failed) in the past eighteen months is a hundred times the number the FMCSA has put out of business. Is market economics the real regulator of our industry? If so the market it poised to act.
In order to ensure our industry is running safe, compliant trucks driven by safe, compliant drivers, it must get reasonable rates and be able to maximize the utilization of both. Anything that does not support that premise (second-tier carriers, shippers or enforcement) does the entire supply chain a disservice.
Written by Kevin Mullen: Director- Safety, ADS Logistics