making process. At a time when every dollar counts, shippers need to know that the
money they’re paying over and above the
base rate is really going to cover a carrier’s
variable expenses. At the same time, they
want assurances that their dealings with carriers will be kept confidential from rivals. In
the absence of a well-staffed internal logistics department, such niceties become the
responsibility of outside experts.
A Twofold Approach
John Williford, president of global supply
chain solutions for Ryder System Inc.,
agrees that service and cost must go hand in
hand. In the case of the latter, he says Ryder
has been “rolling out a new system that
makes it quicker and easier for us to share
resources across our different accounts in
dedicated contract carriage.” The effort
relates to such elements as management,
back-office resources, hourly employees
and even the occasional truck.
Williford says the program also can
help clients to fill in the gaps caused by
their reluctance to invest in new IT projects in 2009. “Lean” concepts are yet
another part of Ryder’s push to eliminate
waste and lower costs.
Bad economic times are supposed to
prompt businesses to look for every opportunity to shed costs. But a number of companies held back from entering into
outsourcing arrangements last year, evidently because they lacked the IT or management resources necessary to launch
such projects. According to Williford,
“there’s a sharp increase in projects this year
that were postponed [in 2009].” Budgets
appear to be loosening up, and executives
seem once more willing to engage with outside partners in areas such as logistics.
The work involves much more than just
negotiating with carriers. Increasingly, says
Williford, clients are asking LSPs to help
them cut inventory levels through the use of
event-management and visibility systems.
The rush toward manufacturing in Asia has
caused many companies to increase safety
stocks in order to offset the risk of longer
supply lines. For its part, Ryder is offering
help in the form of two new transportation-management centers, initially focused on
automotive clients and later expanded to
cover aerospace, retail and consumer packaged goods. The provider is also doing
more consolidation and deconsolidation of
Asian containers in Canada, a result of its
For shippers, one positive side effect of
recession is easy access to capacity. Many
sectors that were constrained prior to
2009—ports, trucks and warehouses
among them—are now begging for business. But Williford warns that the glut won’t
last forever. He says capacity could begin to
tighten up in the second half of the year. To
prepare for that eventuality, shippers and
LSPs need to forge good relationships with
carriers now, based on more than just scoring the lowest rate. “Carriers are loyal to the
companies that value their service,” he says.
Gary Kowalski, chief operating officer of
Menlo Worldwide, says a capacity crunch
could reappear in the truckload market by
the end of this year. Overcapacity will likely
level off in the second quarter, then gradually erode as various sectors of the economy
show signs of life.
Less-than-truckload carriers could be in
for a tougher time. Supply exceeds demand
in that mode by 20 to 40 percent, Kowalski
says, and several of the largest carriers are
struggling to survive. Any number of exter-
nal factors, especially a rise in the price of
fuel, could provide the tipping point. Other
potential headaches for carriers in 2010
include tight credit markets and a recur-
rence of the driver shortage.
