A quick glance at freight indices, such as the Market Demand Index (MDI) and the Shippers’ Condition Index (SCI), shows that motor carriers continue to have the upper hand when it comes to negotiating with shippers. That’s good news for safe, reliable carriers, who are well-positioned to take advantage of the favorable market conditions. For shippers, the current market is as painful as what carriers have been facing at the diesel pump this year. This is the reason why BirdDog is providing transportation procurement best practices for all types of business’s in all industries.
With the market stacked against them, here are three things shippers can do to get the most bang for their buck.
The MDI Challenge
For most of 2011, the Market Demand Index (MDI) has strongly favored carriers over shippers. In recent weeks, MDI has climbed back up to 14.56. Earlier this year — at the height of produce season — MDI peaked at 15.62, and then fell to below 12 before beginning a second upward climb in late May.
To understand the leverage an MDI of over 14 provides trucking companies, consider that the market equilibrium resides at an MDI of 7.0. Shippers take control when MDI dips below 7.0, and carriers have the upper hand when MDI is above 7.0. All in all, 2011 has been a good year for reliable carriers with solid CSA scores.
SCI Shows Temporary Improvement for Shippers
The Shippers’ Condition Index (SCI), another indicator of the freight market, shows short-term improvements for shippers. According to report publisher FTR Associates, the June SCI was -5.4, up from -11.4 in May. With SCI, any reading above zero suggests a favorable shipping environment. The improved SCI is being tied to a general slowdown in freight demand growth as well as delays in new federal regulations for carriers.
The break for shippers won’t last, according to FTR. An improving economy combined with a tighter regulatory environment will push the index further down the SCI’s negative scale. Shipping costs are expected to increase through the balance of the year and into 2012. Carriers who are able to withstand the current regulatory and economic challenges should be able to capitalize on the shippers’ challenges.
Get the Most for Your Shipping Dollar
During times when shipping dollars are stretched especially thin, there are steps shippers can take to ensure they are getting the most bang for their buck. Here are three things you can start doing today:
- Take a Long, Hard Look at Your Shipping Practices — Savings often result from discovering previously unseen opportunities. To reduce truckload costs, start by looking at 6−12 months of shipping history with a focus on maximizing each load. As we illustrated in our most recent Stop Buying Transportation. Procure It!™ article, consolidating several less-than-truckload shipments into a single multi-stop truckload often generates significant savings and can reduce risk of cargo damage. This approach may take some extra coordination with customers, but it is well worth it.
- Tap Into a Large Network of Reliable Carriers — Unfortunately, not all carriers are created equally and unless you have a long-standing relationship with a company it’s hard to know for sure if it is safe and reliable. That’s why many shippers turn to an established network of carriers, such as the BirdDog Preferred Carrier Network. To haul for BirdDog, carriers must pass comprehensive background checks, which include a thorough review of its motor carrier credentials, insurance coverage, Compliance, Safety, Accountability (CSA) scores, and information on monitoring services. In addition, BirdDog always checks a carrier’s current CSA score before assigning a load. Carriers with scores below BirdDog’s thresholds are not given work until they bring their scores up to a sufficient level. To ensure that you are getting the best and safest carrier for your shipping dollar, perform comprehensive checks on all carriers or work with a logistics company that performs the checks for you.
- Don’t Skip Carrier Invoice Audits — Meticulously auditing invoices may not seem like the best use of your time, but there is plenty of value in the process. Shippers that continuously audit their freight bills, or who hire a third-party to do it for them, report substantial savings. The trick is to comb through every line item of every invoice every single week to uncover inaccuracies and overcharges.
BirdDog Solutions clients who employ these and other cost-saving measures save an average of 10% to 20% off their shipping costs. To learn how much you can save, click here to request a Free Savings Analysis.
Tagged Transportation Procurement