- THE MAGAZINE
Despite high fuel costs for suppliers, buyer power remains significant because of high competition between national trucking services, as well as medium competition with substitute freight transport and logistics suppliers. To help procurement professionals make better buying decisions, business intelligence firm IBISWorld has added a report on the procurement of National Trucking Services to its growing collection of procurement research reports.
This report is intended to help buyers of national trucking services. Long-distance freight trucking operators handle various commodities, typically palletized and transported in containers or van trailers. They provide general freight trucking services between metropolitan areas, usually across state borders. Such trips are further than a same-day return for the trucker, and include truckload (TL) or less-than-truckload (LTL) carriers. Local freight trucking operators, as well as letter and parcel delivery services, are excluded from this report.
National trucking services have a buyer power score of 3.6 out of 5. Although scores closer to 5 represent stronger negotiation conditions for buyers, recent price trends have weakened buyer power. In particular, the volatile and relatively high price of diesel fuel has forced national truck operators to charge hefty fuel surcharges, says IBISWorld procurement analyst Agata Kaczanowska, “and adjust them weekly, in order to protect their profitability with respect to this quickly changing input cost.”
Additionally, continuing recovery following the global recession has fueled a rise in demand for trucking services from the manufacturing and retail sectors, applying upward pressure to prices.
Nonetheless, buyer power remains significant because of high competition between national trucking services, as well as medium competition with substitute freight transport and logistics suppliers. Current market suppliers include United Parcel Services Inc., FedEx Corp., Con-way Inc., JB Hunt Transport Services Inc., YRC Worldwide Inc. and Schneider National Inc.
Such competition is magnified by the high number of these suppliers and low switching costs for buyers. As a result, “buyers that regularly demand national trucking services can negotiate discounts because long-term contracts help suppliers achieve logistical efficiencies and ensure a steady cash flow,” says Kaczanowska. Buyers that reduce wait time, improve loading time or reduce other supplier costs can also use these points as leverage in negotiations. Furthermore, buyers may be able to negotiate freight class exemptions to reduce costs through high quality freight packaging or outside insurance.
Improving logistics and communications technologies are also helping suppliers cut basic operating costs and provide added-value services, including ordering, tracing (tracking) and billing through cloud-based software. Due to the decreasing costs of providing such services once they are adopted by a supplier, buyers can more easily negotiate to reduce or eliminate any associated fees.
Such services can also help buyers reduce administrative and planning costs, especially when integrated with in-house systems. Third-party logistics companies, or brokers, can help earn discounts for shippers whose needs, on their own, cannot reduce carriers’ costs; brokers are particularly valuable in arranging LTL shipments that go onto trucks with many shippers’ goods. For more information, visit IBISWorld’s National Trucking Services procurement research report page.