WERC Study: Higher Transportation Costs and Tighter Capacity Alter Distribution Operations

Shippers and carriers continue to experience the effects of rising transportation costs and constrained capacity that include changes in rates, service levels, and, in some cases, how they do business together, so says a study from the Warehousing Education and Research Council (WERC).

Eighty-three percent of transportation respondents experienced carrier rate hikes in the past year and most expected additional increases during 2006. Nearly 53% reported they had more service failures with carriers.

Nearly 74% of shippers had modified warehouse operating procedures because of service issues, most changing or adding carriers and/or modes. Some companies used brokers to expand their pool of available carriers, and others (43%) added to their lists of approved carriers.

Many firms have changed modes to combat capacity and service issues, the most significant shift being from motor carrier to intermodal, such as trucks, trains or ocean vessels. Companies have also extended their operating schedules, expanded use of so-called “drop and hook operations”, (i.e. when a trailer is dropped in the yard to be loaded or unloaded, then picked up when ready) added personnel, adopted transportation management systems and increased inventories, among other operational changes. At least one firm has shipped less-than truckload quantities as a full truckload—boosting cost along with reliability. The study was compiled by C.F. Lynch & Associates.