The advisory and research company Drewry said shippers should expect reliability levels to fall as rates rise, if recent research is an indicator.
“When rates have been good for carriers, reliability has been below par, while the two best on-time results have occurred in periods when prices have been on the floor,” Drewry Supply Chain Advisors said in its February Logistics Executive Briefing. “While the historical results do leave plenty of room for improvement, it is clear that many carriers are committed to improving reliability, even when the motivation in terms of rates has been missing.
“Worrying for shippers, carriers have shown in the past that their threats are not always bluffs. Prolonged periods of low rates have been shown to eventually bring about a sharp deterioration in reliability.
Drewry said shippers should explicitly emphasize the importance of reliability when drawing up contracts with their carrier parntners.
“It begs the question, ‘what level of service quality should cargo owners expect for their money?’” the company said. “Until on-time key performance indicators become a standard feature of contracts, perceptions on both sides of what constitutes ‘value for money’ will remain a gray area and a cause for further antagonism. It might be time to remove the ambiguity and for all parties to make clear what they expect.”
Finally, Drewry said carriers should not expect rapid results from short-term improvements in reliability, but rather see it as a way to differentiate themselves from a homogenized market.
“Wise carriers know that better service reliability does not automatically translate into premium rates,” Drewry said. “But it will make them more attractive to the shipper that knows price is not the only factor to consider when selecting a service provider.”