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Shipper: Freight Economy ‘Most Disruptive’ in Memory

The current freight transportation market has been the “most disruptive time we’ve seen in domestic transportation,” says John Janson, director of global logistics for Sanmar, at the FTR Transportation Conference.

The sentiment, reports Truck News, was echoed by many of his shipper peers, who are all vying to secure limited capacity while keeping some control on rising rates. 

“I’m not seeing anything in the near future that’s going to change that,” he added. “One challenge we’ve really seen and continue to focus on is accessorial charges. There is a higher premium on a driver’s time and that asset utilization. Shippers used to have the opportunity to take advantage of trailers for storage, now all the focus is on turn time, how fast can you get that equipment back into the marketplace? You have to be able to start shaping your company and your operations to accommodate that.”

Don Daseke, chairman and chief executive officer of Daseke Inc., acknowledged business is good – especially in the flatdeck segment.

“I think we could be in for a long cyclical strength of the flatbed specialized market,” he said. “Part of the reason for that strength is the ELDs certainly contracted capacity a bit. The second factor is, there are really no flatbed companies of size that are adding capacity. If you have fixed capacity of flatbed specialized equipment and strong industrial demand, which there is, you likely have a long-term tight market for flatbeds.”

Higher wages will be required to find the drivers willing to do flatbed work, Daseke predicted.

“What I think has to happen over the next five years, is the average driver making $60,000-$65,000 this year, five years from now will be making $100,000 a year, because how do you attract drivers to a job that has inherent disadvantages? You attract them by paying them enough money to lure them away from other jobs,” Daseke said.

Thom Albrecht of Celadon said business is also booming in the dry van segment, with freight growth outpacing GDP – a rare occurrence, which he said happens about once a decade. He said current market conditions have allowed carriers to bake time into their pricing mechanisms, and this will continue going forward.

Jeff Tucker, CEO of freight broker Tucker Company, said opportunities are being created for small fleets that can market themselves to drivers with perks such as no forced dispatch policies and family environments, and a focus on driver-friendly freight.

“Retailers that allow their operations to hold drivers for six to 16 hours is abusive in today’s environment and it happens every day in retail,” said Tucker. “This economy in trucking allows choices, and choices allow you to pick up and go somewhere else.”

The trucking industry’s growth is currently among small fleets, and shippers are looking to these fleets to fill niche lanes as “one lane wonders.”

“If you have some dedicated runs like we do, and if you can match them with a niche carrier where that lane becomes meaningful to them, it’s a great opportunity,” said Janson. “Last year we added three different sets of one lane wonders where my transportation team has put their sales hats on and they’re out finding these carriers.”

Lee Klaskow, senior analyst with Bloomberg, expects trucking rates to continue to rise, with contract rate increases hitting the mid-teens by the end of the year.

“Our view is that rates will continue to climb from here,” he said.

Janson worries there will be continued pressure on rates.

“As we head into 2019, we are still hearing expectations for high single digit numbers for rate increases,” he said. “It puts an inherent pressure on the shipper to say, what can we control? If we can make ourselves more desirable customers, we believe that will be directly reflected in rates we’re doing with long-term carriers. We are really focused on what we can control …

Daseke agreed that shippers should work with their carriers to eliminate waste from the system, but added there are limitations to how much this can achieve.

“…We can all try to be more efficient and we do that and urge our shippers to be more efficient in the way we can turn around equipment at their premises, but there’s only so much you can do there,” Daseke said.

Full story here.

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