Quote:
Originally Posted by no_worries
I think we've seen the worst in terms of freight volumes. Gross volumes seem to have stabilized and relative volumes have started to improve due to the shrinking of capacity.
The issues the industry faces from here on out will be primarily financial. We've had the credit crunch, that has crimped the ability of the undercapitalized to finance continuing operations. That could be huge issue for many because I believe we still have a recession to deal with. Assuming freight remains stable, the biggest issue presented by an economic slowdown is getting paid. As shippers start to feel the crunch, days to pay get longer. Because many brokers are undercapitalized the time it takes them to pay carriers gets longer...many brokers will go under because they just can't afford the float. Any carrier that doesn't do his due diligence might find a check or two missing. Combine that with the high fuel cost and things will be tight financially.
Carriers that have their financial house in order will be fine. They can afford to absorb the occasional slow- or no-pay and don't have to rely on credit to get through. That and fuel prices will be the two major issues coming up.
There is some indication that pricing power is starting to swing back our direction. I just saw where Wal-Mart is putting many of it's contracts out for bid early. As on exec noted in the article, WM is pretty good about keeping a tight reign on their costs. The fact that they're making this move now might indicate that they think it's a good time to lock-in transportation rates.
I'm trying to fit this together. On the one hand you think we've seen the worst of the freight slow down, but on the other hand you see two of the greatest threats to freight volume yet to run their course- a lack of money available for borrowing and fuel prices.
It's hard for me to imagine these fuel prices not slowing things down dramatically. I think people are still doing things based on habit and that people haven't really adjusted their behaviors for the new economic realities (a Honda Accord gets 10mpg more than an SUV, the cost of driving to McDonalds can be as much as the food, prices on everything will have to rise...) As people start staying home more and buying less due to increase production and transportation costs, it seems it'll cause the amount of semi trailer loads of everything to fall off dramatically. I'm putting things in my own words instead of using jargon to make sure I really understand what I'm talking about.