As a variety of challenges continue to apply pressure on the domestic freight market – a growing shortage of drivers coupled to tight trucking capacity among them – transportation experts report that more “sincere” collaboration between shippers and carriers is now occurring compared to the past as both parties seek greater stability for their operations.
“We’ve talked about shipper/carrier collaboration in transportation for about forever, yet both sides have always been dubious about it,” Mike Mulqueen, senior director for supply chain software provider Manhattan Associates, told Fleet Owner. “But now, far more than in the past, they are setting aside their mutual antagonisms to truly focus on working together better.”
Mulqueen – who spoke at the recent Council of Supply Chain Management Professionals (CSCMP) annual meeting in Georgia as part of roundtable discussion entitled Challenging Times Provide Great Opportunities in Transportation – noted that government regulations, volatile fuel costs, and driver shortages are all conspiring to put upward pressure on transportation costs; an environment that penalizes inefficient transportation operations, he added.
“With the macro-economic environment much more uncertain and operation expenses such as the cost of fuel increasing, things like reducing empty miles take on far greater significance,” Mulqueen explained. “That’s why we’re seeing shippers starting to share things like their three and four week short-term forecasts with their carriers in order to help them use capacity more efficiently.”
He added that all of these issues – fuel costs, freight rates, the driver shortage, and the impact of regulations such as the new Compliance Safety Accountability (CSA) program and hours of service (HOS) reform – are in some ways “rewriting the fundamentals” of the freight market on a permanent basis.
“Look at the previous driver shortage we experienced in 2005; that lasted at most for a year,” Mulqueen said. “Now we’re looking at a shortage where drivers are leaving due to regulatory pressure as well as retiring due to age, yet few are coming into the industry to replace them. Thus it is a very different – and more permanent – shortage that what’s been experienced in the past.”
Demands for more home time and better pay are also forcing changes to the orientation of trucking operations as well, he pointed out. “Look at J.B. Hunt, for example: their truckload division is shrinking while their dedicated and intermodal divisions are growing,” Mulqueen noted. “They are moving away from traditional long-haul to more dedicated and shorter-route operations.”
The upshot of such a trucking “shift” for shippers, he said, is that it’s forcing them to move away from a traditional “tactical” focus on transportation and overall supply chain costs and instead adopt a more “strategic” approach.
“In the past, many shippers simply focused on ways to squeeze out day-to-day transportation costs,” Mulqueen emphasized. “Now many realize they need to take a much broader – and collaborative – approach in order to move the needle, as it were. It all comes back to what we call 'profitability at the product level': how can I lower my total cost of service for moving goods through the supply chain from start to finish.”
That also means abandoning – to a degree – a heavy reliance on automated technology, he explained. “We’ve gotten away from talking to people face-to-face in this business somewhat,” Mulqueen noted. “Sometimes a ‘less structured’ form of communication can be more ideal, with all the parties sitting down to discuss challenges and possible solutions. You can’t just live in your ‘silo’ anymore, separated from the larger issues of how to jump-start supply chain optimization.”