Wall Street Journal Article Highlights The Opportunity To Reduce Your Freight Costs
If you read the Wall Street Journal (WSJ) on April 18th, or have been reading trade publications and financial analysts’ reports you know that shippers have an unprecedented opportunity to reduce their LTL and TL costs. All these articles echo what we are seeing. We have as good a grasp of the marketplace as anyone and while we have seen significant fluctuations in the market in terms of a buyers/sellers market before, we have not seen anything like what we are seeing in the LTL marketplace today.
The Wall Street Journal article noted the soft demand in the transportation sector. Over the past couple of months the earnings reports from the motor carriers have been weak. For example, Federal Express reported a 10% decline in operating income in revenues for their Third Quarter, 2007, primarily due to operating losses at FedEx National LTL. Recently, Con-Way announced a 59% reduction in their quarterly earnings. The results for Truckload Carriers have, for the most part, been anemic. The government reports have also noted the reduced freight volume with the Transportation Services Index (TSI) falling 0.3% in February which was the sixth monthly decline in the past nine months, and the 20th decline in the 38 months since January 2004. The index is 2.6% below its peak in May 2006.
That’s what makes things like FedEx’s 5.59% general rate increase, and Old Dominion’s 5% general rate increase so interesting. Few major shippers are paying these increases. In fact, as the Wall Street Journal noted, carriers are actually taking decreases. This is consistent with reports on the industry from the financial institutions that track the market.
Consider Bear Stearns report dated March 11, 2007: “Another consultant contact of ours said there are a record number of requests for proposal out right now as shippers are trying to take advantage of the soft TL and LTL spot market. One of the national LTL’s he works with has been asking for a slight y-o-y increase in contractual rates, but generally accepting modest y-o-y decreases to maintain business. Our sense ... is that the freight economy remains weaker than the general economy.”
According to Morgan Stanley’s recent Proprietary Truckload (TL) Freight Index Update: “the index level is still weak when compared to recent years. Conclusion: Demand for trucks in the near-term still appears to be weak, if modestly improving. However, several TL and LTL carriers have mentioned recently they are using price as a means to protect or increase volumes. These comments hardly suggest the market is improving sharply.”
Steps You Should Take
What does all this mean for LTL shippers? You have a great opportunity to reduce your costs. In fact, when it comes to negotiating your LTL rates, we can verify that what you do, how you do it, and when you do it can make as much as a 20% difference in what you pay for LTL freight costs. When you’re talking about savings in excess of 20%, it draws attention – which is why I’ve been quoted in several publications and have had people calling and asking for some insights into what they should be anticipating for the balance of 2007.
Since this is an Executive Briefing, and you’re very busy, we will adhere to the one page rule. But we received such positive feedback on this information that we wanted to make it available to our readers. So here is your choice. If your company believes that they already have the best rates possible, or is unlikely to take advantage of these savings anytime soon, you can sign off now. If you want to review some thoughts about how to take advantage of this unusual savings opportunity, click below to read our observations for reducing your freight costs.
"That's it for now....and all on one page".
