A recent post on Logistics Management’s Loose Change blog tried to make that case that truckload rates will defy prevailing wisdom and actually begin to climb in the coming months. The logic is based on two things: First, that attrition rates of truck fleets would tighten up capacity. Second, that tonnage increases in recent months are indicative of a rebound.

But, I’ve got to take issue with both points.

While fleets thinning the herd of old, worn out equipment without replacing them will lead to some attrition, it’s unlikely to have a noticeable impact on truckload capacity. They would need to sustain that policy for a long time (months or years) before it would really be felt. It’s more likely that this is a short term cost-cutting strategy to keep the carriers’ numbers in the black.

And while tonnage may have been on the rise recently, it is still nowhere near the peak levels of 2005 or early 2006. Until we start climbing back to that level of sustained volume, I’ll interpret a two month bump in tonnage to simply reflect some increase in the transport of heavy loads, rather than an indicator that overall load volume (by weight AND # of shipments) is on the rebound.

So that’s where Dave Schneider and I disagree. But if I read him correctly, he and I would both argue that now is a good time to consider sourcing truckload transport, although for different reasons. He appears to believe now is the time to lock in spend, before prices increase. And I believe now is a good time to evaluate your options since the increase in available capacity leaves some opportunity to cut costs.

Why do I think now is a good time to seek better pricing on truckload & less-than-truckload contracts. Several reasons…

• The market is at its softest point in years and is expected to remain anemic through the summer. Even the rosiest predictions don’t anticipate a dramatic upturn in demand for several months and some believe demand and prices may actually fall further.
• Truckload has taken the biggest loss in business due to the downturn in the economy. Until the economy starts to show signs of recovery, there will be excess capacity available. I’m not going to get into when and how that recovery will come about because frankly, it’s far too early to tell and there are too many moving parts (Federal stimulus package, fuel costs, further Fed rate cuts, etc.). But, it seems pretty unlikely that the rebound is just around the corner.
• Flatbed trucking is now an attractive mode to source due to the downturn in the construction industry. Another year of double digit declines in housing starts is likely, so there should be plenty of capacity for at least the next couple of quarters.
• Unlike previous years when there was more demand than capacity, carriers are actively expressing interest in future bids, indicating they have empty trucks they want to fill. In other words, they are hungry for business and likely ready to wheel and deal (sorry yes, the pun was intended).

Rachel Rutkoski is a Category Manager for Transportation and Logistics in Ariba’s Global Services Organization. Rachel is recognized by the Institute for Supply Management as a Certified Purchasing Manager (C.P.M.) and has several years experience as a supply chain and transportation analyst in Fortune 500 companies.