CTSI Hot News

Fuel prices are rattling the supply chain

Commercial Appeal
By Jane Roberts
May 18, 2006

When fuel prices are draining profits and a persistent driver shortage nearly holds the supply chain hostage, being a trucker's darling is an admirable goal.

Just ask the dozens of shippers in town Wednesday for the start of Continental Traffic Service Inc.'s two-day client focus group at FedEx Institute of Technology.

"It used to be you could rate-shop. But it's worth paying extra now to be a premium shipper because carriers are getting very picky about the freight they accept," said Tom Brissenden, head of third-party logistics at Arvato Services.

The time to build those relationships is now before the heavy holiday shipping starts in the third quarter. Latecomers will be out of luck, he says, at a dance now based nearly entirely on shippers and carriers being in step with each other's needs.

"We have to find ways we can both win," Brissenden said.

"I'm seeing more cooperation on the carrier side than I ever have before."

Shippers call it being "carrier-friendly," says Brian Williams, director of transportation management at W.W. Grainger, which reported $5.5 billion in sales for 2005.

"It means not making a carrier wait while your warehouse crews get an order ready."

It also means using data-driven warehouse management systems to stage loads based on geography so carriers can bypass terminals.

The returns, in a climate marked by severe truck driver shortages and at least twofold increases in diesel prices, are better rates for preferred shippers or discounts, for instance, for clients who submit electronic bills of lading, easily updated online during the shipping cycle.

"We're finding out that inefficiencies and bottlenecks in the system cost trucking companies 250 million hours a year," said Ken Hazen, CEO of Memphis-based CTSI, the second- largest freight billing company in the world.

"That costs the supply chain about $10 billion a year, and it is felt every step of the way," he said.

The company hosts the conference each year to update customers on market trends. This year, about 100 participants are registered from across the nation.

Reid Dove, president of AAA Cooper, No. 11 in the U.S. less-than-truckload carrier business, suggests carriers can help by monitoring "freight flow" to determine shipping patterns.

"Most shippers ship to the same customers all the time. But if we can determine a pattern, maybe we can build a load in Memphis that will go all the way to Ocala, Fla.," he said, bypassing other terminals and saving labor costs and breakage expense.

The industry's biggest challenge, he said, is "balancing capacity with driver shortages."

Last year, the industry estimated it was short 20,000 long-haul drivers, at least double the shortage it faced only two years earlier in 2003.

With the average trucker between 50-55 years of age, the problem will quickly compound.

"By 2014, if the trend is not reversed, the American Trucking Association is predicting shortage of 110,000 drivers," Hazen said.

ATA is proposing the use of triple trailers and longer-axle trucks that could hold as much as 97,000 pounds of freight, more than twice today's average load of 40,000 pounds.

"Don't just give us a load of freight. Let's see how we can collaborate," Dove told conference participants, including The Gap, Mueller Industries, Pitney Bowes, Crate & Barrel and Waterpik.

It's good advice, Brissenden says, because "damage or loss is not just bad for the carriers. Shippers lose credibility with their customers becau