June 1, 2007

Rate woes?

By DC Velocity Staff

Demand for truckload and less-than-truckload (LTL) service is soft right now, and shippers are taking full advantage of the situation to pressure carriers to reduce rates.However, the consensus of a panel of trucking executives at last month's annual conference of the Warehousing Education and Research Council was that they'd better not get used to it. The panelists warned that the transportation industry will face more challenges in the near future as a result of increasing freight volumes, highway congestion, rising fuel costs, and the chronic problem of attracting and retaining drivers.

Jim O'Neal, president of regional truckload carrier O&S Trucking and current chairman of the Truckload Carriers Association, acknowledged that demand for trucking services had been softening for more than a year and had led to overcapacity in the industry. "That's a dilemma for shippers," he said. "Are they praying for a soft economy, or do they want things to pick up and [therefore] face tight capacity?"

O'Neal said he expects few carriers will add capacity in the near term. Right now, he noted, the main challenge for many truckload carriers is simply survival.

Part of that survival challenge will be finding qualified drivers—a long-term problem for the industry. "For us to attract and retain people, we have to make certain improvements," said Richard Hoehn, vice president of sales and supply chain for regional LTL carrier Averitt Express. "First and foremost is the issue of driver compensation.We have to make it financially attractive to come into the industry.Additionally,we have to improve the quality of life."

Patrick Reed, executive vice president and COO of FedEx Freight, expressed similar views. "The challenge is not only to attract employees and pay well and make the quality of life better," he said. "Great companies have to go a step further. We need 'engaged' employees. There is a huge tie between engaged employees and customer service."

Though motor carriers may not want to add trucks right now, they'll have to invest in other portions of their business in order to succeed, Reed added. "The fact of the matter is, people want quicker, more reliable service and better visibility," he said. "That demands investment in capital and technology."

Hoehn agreed. "Shippers are asking companies like ours to offer more services, niche services, and solutions to problems. It is important for us to become single-source providers and to become entrenched with our customers."

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