Some Noticable Changes

The past 6 months or so I have noticed some changes going on that are looking like a trend. I’ve started talking with some folks at shippers and it has confirmed what I was thinking, at least as far as the small group I have spoken with.

Shippers that had been using trucking companies to ship their products seem to be moving away from contracting with company X, and moving toward freight brokers to find trucks.

I recieve alot of emails from brokers recruting trucking companies for dedicated freight lanes and asking for bids.

Last week I was at a cable manufacting company and I was the last truck of the day. The loader was great and very talkative. He apologized for the delay and said since they changed their shipping about 6-8 months ago they always seem to be behind.

A small company about 400 truck size had the contract for years and they preloaded most of the loads. Since the change they always do live loads and get alot of trucks they have never seen before. The loader has worked for this company for 15 years. He also has noted alot of the trucks look terrible. He loved my truck and was very suprised when I told him the age.

I have had similiar experiences several other places. In some cases it sure looks like some companies are moving toward frieght brokers more often for their needs.

I’m not making any judgements as to why or what the overall outcome may be, but it is definetly going to have an impact on the industry.

In some cases it sure looks like some companies are moving toward freight brokers more often for their needs.

Honest question here.....why do you think that is? Do you think it's simply to save money early in a downturn? Maybe renewing their contracts was too expensive because they were based on rates from the past couple of years?

Contracts give the shipper a guaranteed price for the term of the contract. This is a good thing if rates are rising or there is uncertainty about what freight rates will do in the next few months. With rates dropping and going lower for the foreseeable future there's no benefit to shippers in locking in a rate.

That's an excellent point, Pacific Pearl. Indeed, you would not want to lock in rates in a falling-rate environment.

Contracts give the shipper a guaranteed price for the term of the contract. This is a good thing if rates are rising or there is uncertainty about what freight rates will do in the next few months. With rates dropping and going lower for the foreseeable future there's no benefit to shippers in locking in a rate.

While I understand this, why wouldn't a shipper (if they're generally happy with the trucking companies they're using) try negotiating a new rate with the carrier?

Also, it seems this would be all the more reason the carrier's salespeople should be making regular, in person, contact with the shippers to keep them happy. Sometimes donuts help. :)

While I understand this, why wouldn't a shipper (if they're generally happy with the trucking companies they're using) try negotiating a new rate with the carrier

They can probably get it done significantly cheaper going through a broker, since there isn't a lot of freight right now companies and O/O will be competing with each other to see who can go the lowest.

Why lock yourself into a contract with a company for X per mile when you can find people willing to do it for less?

Just an added thought:

One reason a company may want to lock in a rate right now is for stability. Sure, rates are going down right now, but what about when they rebound? How much of an increase will it be for the market? The last thing that a company wants right now is uncertainty and there is no certainty as to when rates will begin to increase and by how much.

None of this is to say that your points are not valid. It's just a thought as to why a company might want to lock in a rate, even with a falling rate market.