Viewpoint: Transportation’s tug of war

The leaves are falling and footballs are flying, and that means it’s time to share the findings of Logistics Management’s (LM) Annual Study of Logistics and Transportation Trends (Masters of Logistics), the clearest picture available of transportation spending across the modes and the most comprehensive summary of how logistics professionals are managing their operations in current business conditions.

First, the LM staff would like to thank the 766 domestic and global logistics, transportation, and supply chain management professionals who took the time out of their schedules to participate this year. This is a fairly detailed questionnaire, so the fact that we had such a terrific response tells us that the results are well worth the effort in the eyes of our readers.

This marks the 23rd year that LM has partnered with Karl Manrodt, Ph.D. and Mary Holcomb, Ph.D. to capture the results. Through the pages of LM, online in our Annual Masters of Logistics webcast (September 25), and in a live session at CSCMP’s annual conference, Holcomb and Manrodt’s presentation of these results have helped countless logistics professionals re-engineer their operations. And of course, I’d be remiss if we didn’t thank the group of University of Tennessee graduate students who have the job of crunching the numbers as well as our research partners at Con-way Inc. and CarrierDirect who have lent intellectual support in presenting the findings.

This year’s results paint a dramatic picture of a struggle, a freight transportation tug of war as our research team so accurately defines it. Our results illustrate that shippers and carriers now have diametrically opposed business objectives.
At one end of the ponderous rope we find the carrier base looking to maximize profitability while their costs are rising in the midst of a maelstrom of operational challenges. At the other end, white- knuckled and holding on for dear life, are shippers trying to reduce their costs while managing increasing demand uncertainty from all customer levels.

“In fact, many shippers are asking for cost reductions at the same time that they’re asking for improvements in service,” says Mandrodt. “In the trucking marketplace, for example, where capacity is tight and carrier costs are increasing due to factors such as the HOS rule change and the impact of CSA, a struggle has ensued to find a collaborative point.”

But how can two parties collaborate when their business goals are so disparate? “The two parties need to find common ground,” says Holcomb. “Our analysis shows that shippers and carriers are aligned on two key points. They both believe that a core carrier relationship adds value to the shippers operation and also helps a carrier achieve their business goals.”

But there’s the rub, adds Holcomb. “Both feel that shippers rely heavily on price when choosing a core carrier—and we know it’s difficult to be innovative and help achieve your customer’s goals while being the lowest cost service provider.”

Holcomb and Mandrodt believe that closing this cost/service gap between shippers and carriers represents an opportunity to alter the current struggle. “Instead of pulling against each other, carriers and shippers must work on those areas that will result in lower operating costs for the carrier, while providing better service to end customers,” says Holcomb.

Starting on page 24, our research team digs into the findings and offers suggestions for putting an end to this tug of war so that to both sides go the spoils.