At the CSCMP conference, I heard a lot about the need for good relationships with carriers. Given that more than 50% of the for hire trucks are in fleets of less than 20 trucks, having a relationship is impractical. (It is like one girl wanting to date everybody in the Marine Corp). My thesis is that:
- Most transportation contracts are too vague to be the foundation of a relationship
- Carriers have a responsibility to their employees and shareholders to maximize profit and thus should not run at below market pricing without long-term guarantees
- Shippers have a responsibility to their shareholders to pay the least possible rate to provide the level of service needed
- All this creates conflict
- We will be better served to treat transportation as a commodity
Oil is hovering around $75…oil at $100? Lots of traders are betting on this. Hang on for the ride!
A reader comments on last week’s column about paying carriers too slowly….
The reason companies that are crying for capacity are not paying faster is that the accounting people who pay the bills are totally disconnected from the teams in the business that depend upon the transport services. They neither know nor care about driver shortages-and their only metric is full utilization of their payment terms. The financial people really believe they get a working capital benefit from delaying payment until the last minute and that is their primary consideration. . .