Laggards Lose Out in Transportation Management

A recent Aberdeen Group research report, “New Strategies for Transportation Management,” strongly suggests that competition for transportation carrier services will continue to increase, and that companies need to continue to develop new, adaptive transportation management strategies in order to reduce “freight spend” and take advantage of this increasingly competitive freight carrier environment.

The report, with a total of 286 respondents— manufacturers, distributors, retailers—finds that the current point of change in transportation management for the respondents are customer-related pressures “as customers migrate more volume to more reliable and flexible providers.”

A number of factors have combined in the last few years to help create a serious freight capacity crunch, and transportation management strategies now must take into account the need to woo carriers, says Beth Enslow, vice president of enterprise research at Aberdeen Group and author of the study. Transportation carriers have raised their rates from 2% to 19%. Surcharges for higher fuel costs and other accessorial charges for such services as stop-offs and residential deliveries are important factors in these price hikes, and these surcharges are liable to continue.

Companies surveyed in the study are well aware of the issues: Twenty-nine percent plan to switch from homegrown or custom applications and spreadsheets to commercial transportation management systems in the next 18 months, and 45% place freight capacity and accessorial charges at the top of their lists of concerns.

The study offers several suggestions for ways to counteract the pressures it describes, including automating carrier processing, reducing dock dwell times, creating incentive-based carrier contracts, and rethinking accessorials, warning that “conventional wisdom on eliminating accessorials is faulty for companies with good cost accounting and a modern transportation management system.

In addition, the improvement of the general business climate over the last few months, carriers’ reduced investment in new equipment, and an aging workforce—a significant number of drivers are over 50, Enslow says, and younger recruits are few—have produced a situation in which those companies that need to enlist carrier services often have trouble finding them. “There’s been a change in the relationship,” says Enslow, “to a more adversarial relationship” in which companies looking for transportation services need to show that they can utilize those services efficiently.

For their part, carriers are working to increase their capacity. This includes trying to recruit and train a new generation of drivers. “Some of the larger companies have pretty aggressive programs,” says Enslow, though she adds that it will take some time to eliminate the scarcity of younger, trained drivers.

For more information on this study, visit http://www.aberdeen.com.

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