{"id":1113,"date":"2014-01-02T16:40:44","date_gmt":"2014-01-02T21:40:44","guid":{"rendered":"http:\/\/www.xtl.com\/?p=1113"},"modified":"2021-01-19T11:42:52","modified_gmt":"2021-01-19T16:42:52","slug":"myth-carriers-raise-rates-boost-profits-busted","status":"publish","type":"post","link":"https:\/\/www.xtl.com\/portal\/myth-carriers-raise-rates-boost-profits-busted\/","title":{"rendered":"Myth: Carriers Raise Rates to Boost Profits – Busted"},"content":{"rendered":"

\"iStock_000027163113XSmall-edit\"<\/a>In a recent study released by The Conference Board of Canada titled, “We Have Been Here Before” it concludes that since deregulation in 1987 as a whole, the transportation industry has absorbed cost increases while passing most of their productivity gains on to shippers.<\/p>\n

Some of the key findings of the study are:<\/p>\n

From 1986 to 2003, trucking industry total factor productivity (TFP) increased by an average 1.7 per cent per year. Meanwhile, prices increased by just 0.8 per cent per year on average in nominal terms, while prices dropped in real terms. This adjustment occurred despite average increases in input prices (labour, fuel, capital,etc.) of 2.6 per cent per year.<\/b><\/p>\n

Put another way, 87 per cent of productivity gains have been used to hold down output prices in the face of rising fuel, capital, labour, and other costs, rather than to increase profit.<\/b><\/p><\/blockquote>\n

This study echoes what most people who work in the transportation industry know to be true.\u00a0 That trucking is a highly competitive industry where survival depends on productivity gains and price competitiveness.\u00a0 Generally, any price increases passed along to customers are absolutely necessary and reflective of input cost increases.\u00a0 And, as the study concludes, most of all productivity gains are used to offset input price increases experienced by the carriers in terms of fuel, labour and insurance cost increases.<\/p>\n

Things You Can do to Help Lower Transportation Costs<\/h2>\n

Many shippers believe that volume buys lower rates.\u00a0 While this is true to some extent, there is a limit to this logic.\u00a0 Think about it.\u00a0 If you drive from point A to point B and add up your time, wear and tear per mile, cost of fuel, etc.\u00a0 Then do it 100 times and see if your costs go down.\u00a0 They don’t.\u00a0 The real challenge to getting costs down is to work with your transportation provider to take cost out of the system.\u00a0 Here are some areas where you can work with your carrier to help reduce transportation costs:<\/p>\n

Waiting Time<\/h3>\n

Any time spent by the carrier waiting to get loaded or unloaded, is waste.\u00a0 It’s productive time that is not being used for a productive purpose.\u00a0 Take steps to reduce waiting time at your facility.\u00a0 Get trucks in and out fast.\u00a0 Many shippers have policies of appointment system and\/or first come first served systems.\u00a0 While neither are perfect, the focus has to be on getting the average waiting time for carriers down.\u00a0 In the end, any unproductive time for the carrier will find its way into your rates.<\/p>\n

Fair Assessorial Charges<\/h3>\n

Many shippers take the approach of trying to eliminate or reduce assessorial charges to unrealistic levels.\u00a0 Unrealistically low, or non-existent assessorial charges introduce an element of risk for the carrier.\u00a0 A carrier’s margin is slim and an unexpected cost without compensation can make or break their profitability.\u00a0 A carrier will have to charge more in their base rate to compensate for the “uncertainty factor”.\u00a0 Talk with your carriers and negotiate fair and equitable assessorial charges.\u00a0 This will allow the carrier to price their line-haul economically.<\/p>\n

Be a Shipper of Choice<\/h3>\n

The best, most experienced drivers often have first choice on the loads they want to take.\u00a0 These most experienced drivers are the low cost drivers.\u00a0 They know the paperwork, their routes, and how to drive in the most efficient manner.\u00a0 If these drivers enjoy picking up and delivering at your facility, you’ll be come a shipper of choice.\u00a0 These drivers will want to frequent your facility.<\/p>\n