Survey Shows 'Good News' for High-Tech Carriers
ANAHEIM, Calif. Shippers have been spending more on transportation and using more technology. They are dealing with fewer carriers and getting more for their money.
Those are some of the conclusions drawn from the seventh annual “Giants of Shipping” survey done by Ernst & Young LLP, the University of Tennessee and Logistics Management magazine.
The technology findings were apt, researchers said, because just over half of all responses to the survey came in via the Internet. It was the first time the Internet was used to disseminate the survey.
One caveat: The survey was done in early May, so it does not reflect any effects of stock market turbulence that began later. Market influences on manufacturing, distribution and consumption of goods will be caught in next year’s survey, researchers said.
The 286 respondents from 11 “key” industries together spent about $21 billion for shipping, warehousing, billing and other aspects of moving raw materials to plants and products to consumers. Almost half 48% of them were manufacturers. The next largest segment 16% was consumer products and retail stores.
Transportation accounts for 57% of the cost of operating the logistics supply chain, noted the University of Tennessee’s Mary C. Holcomb, one of the researchers who presented survey findings.
“That (percentage) makes it the biggest single component in the logistics supply chain,” she said.
I’m surprised that it doesn’t get more attention” from traffic specialists who seem more concerned with other areas.
More spending for transportation is “good news for carriers,” Ms. Holcomb said. Transportation as a percentage of the cost of logistics has risen steadily in recent years. And shippers indicated they expect to spend more money in coming years.
Yet when measured against their sales, transportation costs are declining for 40% of respondents and staying stable for another 37%. “This is good news for shippers,” she said, because they are getting more value from carriers.
Trucking is the dominant choice among modes in terms of shipper spending for transportation, taking a combined 82% of the total, she continued. Breaking it down, truckload carriers get 25%, less-than-truckload 28%, private fleets 12% and surface package carriers 11%. Air freight takes 10% of the respondents’ spending, rail gets 5% and intermodal shipping gets 3%.
Motor carriers are performing better than in previous years, the survey indicated. The “best” carriers deliver freight on time 97% of the time, make equipment available 96% of the time, and are accurate with electronic data interchange transactions 98% of the time.
The “worst” carriers scored 86% on time, 85% for equipment availability and 90% for EDI.
“The gap is narrowing” between the best and worst carriers, said Ms. Holcomb, citing figures from earlier surveys. This might cause one to believe that all carriers are improving. That belief could be supported by evidence that “shippers’ expectations are getting higher” because they rate carriers more critically, she added.
On the other hand, shippers also said they have pared down the number of carriers they deal with the trend toward so-called core carriers. Shippers are eliminating poorer performers and staying with, or finding, better carriers. So this year’s worst carriers are better than those of previous years.
Shippers themselves are under increasing pressure to reduce costs and improve service, said Richard H. Thompson, a partner at Ernst & Young.
And they are, as indicated by the various measurements of transportation value. Internally, shippers are cutting costs across their wide range of traffic-related activities, and they say that cost-cutting shows up on their companies’ bottom lines.
Shippers turn to outside suppliers for everything from computer software to complete logistics services. Outsiders often do a job better, either because their products are superior and less costly or because they allow the shipper to cut expenses by taking facilities, equipment and employees off the books. Third-party logistics providers gain from this.
Shippers are enthusiastic users of technology and expect carriers to use it, too, Mr. Thompson said. In fact, motor carriers have been leaders in implementing technology and must continue to improve.
Don’t stop getting better,” another researcher urged motor carriers. Karl H. Manrodt, who directs the University of Tennessee’s Office of Corporate Partnerships, said carriers must make constant improvement “a way of life.”
Ms. Holcomb warned that while motor carriers are prospering, they are limited in what they can handle because of increasing highway congestion.
“I sit on urban planning committees which make local transportation policy and all I hear is, ‘We’ve got to get those trucks off the roads,’ ” she said. “And there is never any representation from the industry. They (carrier executives) need to get themselves represented or I don’t know what will happen.”
