Freight rate spikes shaking up the C-suite
According to a panel of shipper executives at CSCMP's EDGE Conference, this year's trucking rate spike has some U.S. companies looking to private fleet, rail options.
It's different this time, according to several shipper executives.
The relatively sudden and violent spike in motor freight rates over the past 12 months has carved an indelible imprint in corporate psyches that has extended all the way up to the C-suite, several shipper executives said today at the Council of Supply Chain Management Professionals' (CSCMP) annual EDGE meeting in Nashville, Tennessee.
The rate surge has been so profound that, for the first time in memory, CEOs and CFOs are publicly alluding to it as a key factor in impacting their companies' quarterly results. However, rates spiked nearly as strongly in the 2003-04 period and then again for a 7-month interval in 2014. After some short-term dislocations, relations between shippers and carriers returned to business as usual, which often meant shippers using their leverage to beat down their carriers on rates.
This cycle has a different feel to it, in part because the impact has been communicated up the corporate ladder. As a result, said Jennifer Kobus, director of transportation for Ulta Beauty, a cosmetics firm. "Leadership is not going to relax on the supply chain." Another factor, Kobus said, is that carriers have access to more data and knowledge than ever before and can be far more selective than ever in choosing the shippers they work with.
In response to the changing landscape, Ulta is piloting a modest private fleet program, Kobus said. The firm is also looking at rail options, something it has shied away from in the past.
Shippers who enjoyed a rate leverage through 2016 and into a good part of 2017 were caught off-guard by the suddenness of the change that began around the fourth quarter of last year. "What struck us was the speed and velocity of how the market changed," said Brad Blizzard, executive director, logistics supply chain management for tiremaker Bridgestone Americas. Bridgestone also has a decent-sized private fleet, which Blizzard said gave him a "360-degree view" of both sides of the issue.
Michael Nasif, director of corporate transportation for plumbing fixtures firm Kohler Co., added that he was surprised by the "change in capacity that happened so quickly."
Blizzard said the freight market is undergoing a "structural" realignment that will keep rates elevated for years. He added, however, that prices should level off from the 2018 spikes. No panelist was willing to go out on a limb and forecast the price bumps for 2019.
About the Author
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
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