The way truckload carriers price their services has been affected by increased usage of transportation management systems (TMS), the transportation and logistics research group of the investment bank Stifel Nicolaus said in an industry wrapup Friday.
“(Truck) pricing has become more technical/surgical as the usage of Transportation Management Systems has become more widespread across the universe of shippers,” the group wrote. “The days of shippers living year after year with rates significantly in excess of market rates appear to be numbered. Some carriers report modest low single digit adjustments. Sometimes these rate adjustments apply to only a subset of a carrier’s total lanes. Some carriers have exchanged capacity commitments for no rate increases.”
Stifel said that shippers appear to be generally adhering to the volume commitments necessary to complement the carrier's capacity commitments.
“One large 3PL told us that auctions conducted now are resulting in rate reductions across the board,” Stifel said. “Clearly, the recent economic deceleration has created enough of a gap between supply and demand to give some shippers the confidence to be a little aggressive at a point in the seasonal cycle when bids seldom result in rate reductions.”
Meanwhile, Stifel also noted that it is seeing shippers rely more and more on third- and even fourth-party logistics providers.
“Increasingly, shippers realize that they will never be able to muster the systems, buying clout and expertise resident within many logistics companies,” Stifel said. “Both logistics companies and shippers can prosper as this outsourcing phenomenon unfolds. Inefficiencies are more than adequate; when they are eliminated, shippers can cut overhead expense and logistics costs, while logistics companies creating those efficiencies for shippers can simultaneously earn handsome financial returns.” - Eric Johnson