Expediters: What Does This Mean to You?

[ATeam]

The March 1-14 print edition of The Trucker includes a summary of the 2008, year-end reports of publicly held trucking companies, survey information and industry analyst observations. The publication is distributed free at truck stop news racks.

All of the information applies to larger non-expedite carriers but there are parallels between our industry sector and theirs.

Article Excerpts:

- Lower diesel prices provided a working capital boost to marginal carriers during the fourth quarter, thus allowing them to continue operations, thereby exacerbating the imbalance between industry truck supply and freight demand.

- We are in a freight recession that began over 27 months ago.

- Shippers are having a field day with rate reductions.

- Some competitors are setting prices below their costs to "help maintain asset utility."

- Dry van rates could fall 7 to 10 percent.

- Shippers are extending payment terms to 60 days and in one notable case as far out as 120 days.

- Industry consolidation is expected.

- Only 15 of the top 100 carriers that existed in 1982 are still in business, only 68 of the top 100 in 2000.

- Shippers are redesigning the entire supply chain to feature lighter, smaller packaging and reduced transit distances.

A survey of 100 carriers by Lana Bates of Transport Capital Partners says:

- 21 percent of the carriers were likely to consider liquidating in the coming six months.

- 23 percent of the carriers would consider selling their businesses in the next 18 months.

- 42 percent of the carriers said credit was difficult, expensive or impossible to obtain.

- 75 percent of the carriers said at least some customers are pressing for unfavorable changes in the fuel surcharge formula.

Bates says most key freight metrics will remain negative all of 2009.

In other articles, The Trucker reported:

- Truck manufacturers are resigned to an unprecedented third year of declining truck sales and that January Class 8 sales have dropped to the lowest level since 1992.

- Cargo volume at the nation's retail container ports was down 7.9 percent in 2008 and is expected to drop 11.8 percent in the first half of 2009.

- U.S. rail carload traffic in January fell 15.9 percent from a year earlier, marking the third straight record monthly decline. Car loadings of every major commodity fell.

- Carriers are reporting decreased returns on used truck sales

- Carriers are reporting unprecedented declines in freight volumes, decreased fleet sizes, and large numbers of employee layoffs, including many drivers.

-------------------------
So, fellow expediters, let me ask, what does this mean to you and how do you intend to proceed?

 

[VBobby]

I'm not an expediter yet but just looking at the thing as a whole; I see one of our nations main engines, not just being shut down, but being disassembled and the parts being scattered.

 

[ATeam]

To answer the question I asked above, the information means that Diane and I are not expecting a broad economic turnaround to occur any time soon. With some truckers now running at a loss to keep their equipment occupied, and shippers taking full advantage of it, it may mean that we will run less this year.

As debt-free one-truck owner-operators, it makes absolutely no sense to us to run our truck at a loss. If freight rates and volumes cannot sustain a profitable operation, we will sit until they do. The good news for us is that in our little niche of the expedite market, while freight rates and volume have declined, we continue to receive profitable load offers. We remain in the black and thus able to fully commit to our carrier and customers.

Contributing to our ongoing success in these challenging times is a carrier that makes a genuine effort to maintain a good balance between its fleet size and available freight.

We intend to proceed the same as we have; namely, we will continue to be available to haul freight that is profitable to haul. We expect to be able to continue to do so because owner-operators in weaker financial positions will be forced out of the industry as the ratio of freight and trucks rebalances to sustainable levels.

Becoming debt-free was a goal we achieved early in our expediting career. It enables us to remain in the business today and continue to profitably serve our carrier and customers in these challenging times. If the freight recession depresses our rates and volume to unprofitable levels, we have the luxury of parking the truck and waiting out those who will run out of money before a recovery occurs.

 

[Turtle]

I see it it as a glass half full....

What does that mean? Some see a glass half full and that's supposed to be a positive thing, because the glass could be completely empty. Some people see it as half empty, I suppose because they want it completely full.

When I see a glass that's half full, or one that's half empty, I see a perfectly good waste of resources in using a glass that's twice the size that it needs to be. Whether the glass is half full or half empty is irrelevant, the only thing that matters is whether or not the quantity in question meets your needs.

 

[Turtle]

That whole half empty, half full metaphor sounds like something that was invented by a motivational speaker. When I see a glass that's half empty, I see that as a positive thing. After all, it could very well be an empty glass. So when it's half empty, it's only half empty. And when I see a glass that's half full, I see that as a negative, because someone failed to fill it up. Why isn't it filled? It's only half full. It's silly. Not a knock on you, of course, just on whoever came up with it. You have to interpret half-full or half-empty a particular way in the first place, even though each can both be interpreted equally negative or equally positive, which makes it a rather weak metaphor for the optimist versus pessimist.

For example, a far more clear-cut differentiation would be...

A pessimist thinks all women are bad.
An optimist hopes so.

 

[Moot]

That whole half empty, half full metaphor sounds like something that was invented by a motivational speaker.

It just occurred to me that there is no "I" in g-l-a-s-s. But there is an "I" in eyeglasses. What does this all mean? Do I have what it takes to become a motivational speaker or perhaps a writer of motivational posters?

 

[DougTravels]

This "half full" discussion reminds me of a question once asked, are you ignorant or just apathetic? The correct answer is of course, "I don't know and I don't care".

 

[greg334]

Sorry guys, I see a half full thing here. There is the ever lasting question of what material the container is made of.

In this day and age would you actually have glass around in a truck or van?

Maybe using a plastic container would be a more modern approach to it, is the plastic coffee mug half full of power drink or is it half empty?


Sorry I have to apologize to EO but this is really really bugging me - you all can just skip over it.


I have to ask Phil, why do you do this?

Ask a question and then 15 minutes later you post what it means to you.

I'm taking the time again to point out something that will help you be a more effective editor (writer) and I am doing it in the open because you don't like to use PM or think I am telling you what to do when I offered to do this behind the scenes. I'm just a lowly 'failed' expediter who is not trying to embarrass you, but to help you.

When you post a question and then answer it, some of us think it is to make the question into a self-promotional themed style thread. I know that you were never a moderator, so you may not get that part but as an editor (writer), you should step away from answering , especially if you are looking for answers that you can use in a future article.

There are a lot of other reasons that you shouldn't do this when researching, but I won’t list them all.

This brings up a problem if you are going into a situation as editor (writer), which is a lot like a roundtable discussion in this setting. I sat on a lot of these in a profession setting with my peers and we had a moderator that never ever interjected their point of view, they kept the discussion going by directing the discussion through questions that either clarified points brought up from members of the group or added value to the discussion by branching into a related issue or simply starting a stalled conversation (which I would say that if you did this after two days, it maybe alright).

Phil, I am not telling you what to do or saying this stuff to trash you but I have an interest in seeing success, not with just EN/EO but you too.

 

[wellarmed]

This half full glass half empty glass has sure made me thirsty.

 

[greg334]

IF GUNS KILL PEOPLE,THAN PENCILS MISSPELL WORDS,CARS MAKE PEOPLE DRIVE DRUNK AND SPOONS MADE ROSIE O'DONNEL FAT

I like that, it speaks volumes of truth.

 

[broker]

ATeam, I'm pretty sure after reading this, you won't be inviting me to dinner soon.

I think I'm going to start calling you the Doom and Gloom ATeam.

As I understand, you are in control of the only true Expediter Mag. out there. I would think you would dig up some good news about our industry, as well as all the doom and gloom stuff.
I purchase many business type magazines every week and most combine a well balanced outlook of their subject matter.
Not the "sky is falling" type reporting, scaring everyone to death.
I'm also sure you are aware that so called "facts and figures", along with "surveys' and "percentages", can be made to look the way a person or group wants them to look.
You see, the more us truckers keep spreading the word about how most are accepting low rates, the carriers, shippers and manufactures will spread the word as well.
We just keep shooting ourselves in the foot.
Sometimes silence is better than, "spreading the word".

We all know what the economy is doing as a whole, not just in the trucking industry.
My "opinion" on all this. The weak will fail sooner and the strong will survive. When this cycle completes itself, it will become a supply and demand outcome.
Less trucks and carriers but about the same number of manufactures. So guess what, it's cherry picking time again for frieght and rates.
Hope they are all enjoying this period of unrest and putting money away.

Kathy and I, we are having a great time, while making a modest income.
We will be one of the survivors and then we will also have a great income.

Like the strong, we have figured out ways to cut costs, to make up for the not so profitable loads.

For anyone to make us think the sky is falling, not going to happen.
I have been through tougher times than this in the trucking industry and the sun still shines.
BIG JOHN

 

[greg334]

Big John,

Let me ask you these two thing;

Would you rather tell the truth from the point of view of an experienced expediter who started as a solo or even a team and struggled to make it, telling a possible newbie in order to prepare them for a hard time and the same struggles?

Even taking that a step further, would you tell them not to enter this business until it I strong enough so they won't fail?

 

[ATeam]

I have to ask Phil, why do you do this?

Ask a question and then 15 minutes later you post what it means to you.

Because in the past, when I have posted a question and not answered it myself, readers have complained that I am requesting information or responses that I am not myself willing to give.

 

[greg334]

Because in the past, when I have posted a question and not answered it myself, readers have complained that I am requesting information or responses that I am not myself willing to give.

Well then Phil let it sit and wait until someone else tries to clarify the question or better yet craft the question in a way that explains what you are thinking that effects us and what it is you are asking about or what you are thinking.

You threw out this big amount of information and you don’t get that some people gloss over it and get lost within it, so of course they will complain.

The information itself has nothing to do with a lot of people, I hate to throw this up but this is where experience in knowing how some of us have to work within these companies can help you understand that.

So I know I am not the best person, only trying to help EN and you. But here is what I would have done.

I would have posted the article (of course making sure I have reprint rights)

And then changed the approach to the question with a preamble and focusing on a narrow amount of information within the article that effect us and this business.

"So, fellow expediters, let me ask, what does this mean to you and how do you intend to proceed?"

To maybe….

”So, fellow expediters, in our world we face pitfalls that may lead us down to a path we don’t want to go. This article has three important points that are being made that I feel directly effects this business;

*Shippers are having a field day with rate reductions.

*Some competitors are setting prices below their costs to "help maintain asset utility."

*Dry van rates could fall 7 to 10 percent.

Let me ask these questions;

What do think these three points mean to you?

How do you intend to deal with them with your company?

Do you see any changes to how you operate in order to deal with these three points?”

I am not as good as I was, but I think you get the idea.

I would not tell anyone my answers to these questions after that point.

Makes sense?

 

[ATeam]

I think I'm going to start calling you the Doom and Gloom ATeam.

That is funny. Not because of anything you said or meant but because there were those who once fiercely criticized me for wearing rose colored glasses. Then as now, I see things reasonably clear and call 'em as I see 'em.

As I understand, you are in control of the only true Expediter Mag. out there. I would think you would dig up some good news about our industry, as well as all the doom and gloom stuff.

I contribute. Others control. If you read successive issues I think you will find exactly what you say it should include. By the way, readers, if you do not yet subscribe to Expedite NOW, a free copy will be mailed to you if you sign up. Click here to begin your free subscription.

I purchase many business type magazines every week and most combine a well balanced outlook of their subject matter.
Not the "sky is falling" type reporting, scaring everyone to death.

I believe that in these recessionary times, an objective survey of the major business publications will quantify headlines as predominately negative. Saying that something is rosey does not make it so. The desire to hear people talk nice will not end the recession, even if they do talk nice. Flowers can be found growing even on battlefields but the battles are the newsworthy items.

I'm also sure you are aware that so called "facts and figures", along with "surveys' and "percentages", can be made to look the way a person or group wants them to look.

That is true, but it that does not mean that the people who produced the facts, figures and surveys cited above are among those who distort facts for ill-intended ends. Most of what is reported is industry figures reported from industry sources. It profits them nothing to report the bad news but they tell the truth because the truth is what it is.

The Trucker is a time-tested and widely respected trucking industry news source. It profits them nothing to report things that would discourage their own advertisers to cut costs and spend less money, but they report the bad news anyway. That is why The Trucker is widely respected.

You see, the more us truckers keep spreading the word about how most are accepting low rates, the carriers, shippers and manufactures will spread the word as well.
We just keep shooting ourselves in the foot.
Sometimes silence is better than, "spreading the word"

Even the least sophisticated shipper you can find is smart enough to go online and price shop. Truckers and carriers don't influence rates with their words. They influence rates with their deeds.

It is in times like these that it is important to know the truth, and the truth is, there are more trucks out there right now than there is freight to haul. The economic slowdown is real. Freight has slowed. A truck capacity excess exists. That's the truth and that's why the balance of pricing power has shifted in shippers' favor.

We all know what the economy is doing as a whole, not just in the trucking industry.
My "opinion" on all this. The weak will fail sooner and the strong will survive.

That is my opinion too, and that of many carriers that are still in the game. A key question is, how soon? Many of the carriers still standing are bemoaning the drop in fuel prices. They would have prefered that fuel prices stayed higher longer so the weaker players would have been pushed out sooner.

When this cycle completes itself, it will become a supply and demand outcome.

Not exactly an original insight. Since deregulation, what has trucking ever been but a supply and demand game?

Less trucks and carriers but about the same number of manufactures. So guess what, it's cherry picking time again for frieght and rates.

I would not be so quick to pick up the cherry basket just yet to go out picking. I disagree with you on the "same number of manufacturers" part. A whole lot of them will not be back because their prosperity was false to begin with. It will be many years before we see anything like the credit-propelled boom of the recent past, if we see it at all in our lifetimes.

For anyone to make us think the sky is falling, not going to happen.

"The sky is falling" and "gloom and doom" are non-specific expressions that mean nothing in serious discourse and decision making. The information presented above is from credible sources and specific to the percentage point.

How one wishes to characterize the information is, of course, one's own choice. I'm not going to argue with anyone about whether the sky is falling. I am happy to discuss specific economic and industry conditions and their meaning to those of us who transport expedited freight.[/quote]

I have been through tougher times than this in the trucking industry and the sun still shines.
BIG JOHN

As a trucker, I have not been through tougher times than this. Barring some unanticipated solar or planetary catastrophe, the sun has nothing to do with how I run my business. When I read that 1/3 of the top carriers that were in business in 2000, are not in business today, I don't look at the sky. I look at my numbers.

(Actually, as I think more about it, the sun has a fair amount to do with my business; daylight savings time, solar powered equipment, sun spots that affect communications, seasonal affects, etc. But in the figurative sense used by broker, the sun has nothing to do with my business.)

You directed your comments to me so I replied. I hope the thread can stay focused on the original question and more expediters will share what the information presented in the original post means to them.

 

[ATeam]

Well then Phil let it sit and wait until someone else tries to clarify the question or better yet craft the question in a way that explains what you are thinking that effects us and what it is you are asking about or what you are thinking.

This is an open forum, Greg. You post as you please. I will do the same. You are free to start your own "What Does This Mean to You?" thred and post follow-ups to your heart's content. If you seek a different presentation to or result from readers, by all means, go for it.

As I said to broker, You directed your comments to me so I replied. I hope the thread can stay focused on the original question and more expediters will share what the information presented in the original post means to them.

 

[VBobby]

As a green horn trying to learn, I too would like to see some answers.

Phil, your question, based on the facts from that article, casts a large shadow of doubt in the mind of someone like me contemplating getting into the business.

I think the dynamics of the change are going to cause permanent change in the expedite business even when the economy recovers.

I am no big business analyst but I have been through a similar business change. I was an airline employee for 23 years. My company, Delta Airlines, was, I believe, the best in service, safety, and customer care that you could get. Without listing all of the things that changed it, they are quite similar in some ways to the list you quote from that article. It was the perfect storm. The result is poor service, consolidation of carriers and reduced capacity that fills every seat but does not cause prices to go up. So now airline travel is a big hassle and is in a lot of ways comparable to riding the bus.

Still, if expediting never is what it was, it will still be. So as you say it is a numbers game and you and your wife like it so as long as you can do it profitably you will. As Turtle said, “the only thing that matters is whether or not the quantity in question meets your needs.” I think that’s the way I will choose to see it to.

I am not very sharp. I guess one could end up like Forrest Gump, and buy a shrimp boat just as everyone else is losing theirs. There is a quote by Branch Rickey; "Luck is the residue of design." If I decide to get into this business I realize it will probably take me years to become an over night success.

 

[greg334]

Well Phil, what can I say?

Does this mean I won't be getting that invite to the annual A-team's RV'ers lifestyle truckapalooza?

vBobby,

Well said.

To answer your question, I am going to base everything on the three points in my suggestion to Phil.

• Shippers are having a field day with rate reductions.
• Some competitors are setting prices below their costs to "help maintain asset utility."
• Dry van rates could fall 7 to 10 percent.

What do think these three points mean to you?


The problem I see is a shift in the market and in the industrial base that the market supports in such a way that there will be no real recovery but a change to redefine the markets. For years we have been seeing declines in manufacturing and other service areas that we service and some expediting companies have followed the trend in this changing environment and changed accordingly.

For example FedEx made some decisions to combine services to lower their overall cost of transporting shipments but in effect a lot of their CC contractors left because of declining rates they experienced and the inability to count on consistency from FedEx. A step further was the shift from a percentage based revenue model for vans to a flat rate in order to remain competitive in an increasing shippers market which in effect has put the van services on the same level as freight and even outside competition.

How do you intend to deal with them with your company?

I intent to do more proactive promotion of my company and my truck to customers in order to boaster my company and hence my revenue in the long run. I have made a number of suggestions that have to do with the back end of the operations to help us, the contractors, plan better money management and even forecasting for our truck. Unlike FedEx and Panther, I can do a lot more to help my company.

Do you see any changes to how you operate in order to deal with these three points?

Yes, I see that I will have to cut back more on trivial expenses, complete a few projects and find more ways to lower my deadhead which is my biggest expense at this moment. I will also have to do more expense tracking and to make sure that I schedule my downtime carefully.

 

[Streakn1]

So, fellow expediters, let me ask, what does this mean to you and how do you intend to proceed?

For my wife and I it means 2009 may not be as profitable as last year. Fortunately 2008 was our most profitable year ever in our six years as owner operators. This in part is due to us cutting our operating cost by approximately 20%. We see no further need for changes in how we operate at this time.

Gauging on the success of the "debt free" expediters on this forum and their ability to survive these hard economic times, I would say that those of us that not only have a truck and or trailer payment, but choose to also have a mortgage, car payments, utilities, etc that are still running a successful and profitable business must be doing VERY WELL!

 

[BigRed32771]

I was doing some thinking along these lines the other day when I read the summary of the FDCC "conference call" from a couple of weeks ago.

The observation was made that pricing and rates are related to the market and driven by customer demand and expectations. Significantly, shippers "expect discounts and will go elsewhere if they are not offered."

This strikes me as counterproductive and destructive in the long run. If rates are driven below costs through discounts, and Phil's report seems to suggest that such is indeed happening to some degree, then shippers "going elsewhere" will put the "elsewhere" out of business sooner or later because operating below costs cannot be sustained in the long run, no matter how deep the corporate pockets. On the other hand, the carriers who did not play along and demonstrate a willingness to run at a loss also lost because the shippers went "elsewhere," and will not survive because they are sitting idle waiting for the "elsewhere" to go broke first. This would radically collapse the entire freight carrier industry, possibly opening up the door for some sort of government intervention to deal with the "emergency" of insufficient capacity to carry on the business of the country. Anyone care to guess which carriers are "too large to fail" and which will be allowed to go toes up when the capacity crisis really hits?

My take on this is that FDCC, and by extension I suppose most of the expedite companies, is slowly bleeding itself to death by driving the trucks out of the fleet due to unprofitable runs. Though a driver can be selective about taking only profitable or "break even" loads, the intervals between them seem to be getting longer, and downtime while waiting for an acceptable load actually drives up the cost which that load must cover (fixed costs are related to time, not distance moved). Since FDCC has no trucks of its own, if they hit a point where there are not enough experienced o/o's willing to continue nor enough suckers... I mean, newbies... coming in the front door to sustain the operation, it will collapse despite being the "Big Name" in the field. Is it possible that this is a deliberate plan? Don't know, but it could be. FDCC is treated as a part of FedEx Freight. I could conceive of folding the two operations into one, with the remainders of the FDCC fleet doing short hauls, true emergency runs and special handlings for FDF (which we do now, anyway) and leave the remainder for FDF. Seems I recently heard that they had started offering guaranteed next day service with scheduled delivery times, which I always thought was part of the expedite niche. This would, of course, be consistent with gradually folding the two divisions together. A similar scenario could be developed for many of the other expedite carriers.

Is this a prediction on my part? No. It is an assessment of how things could very well play out as long as carriers feel compelled to run at a loss just to keep vehicles moving and cash flowing. I've never seen a company survive that mode before, and I don't expect to see it in the future either.

Doug Simmons
FDCC DR4284