To understand how shippers and carriers can better cooperate, we must first understand where the last few years of industry volatility has left both parties.
Shippers found themselves scrambling to keep up with demand in the buying boom of 2021-22, leaning heavily on transport providers to find and create the capacity the market was demanding. In response, carriers took on the responsibility of adding equipment and personnel at elevated pricing to service peak demands.
The shipping environment that prioritized immediate capacity above all else ultimately drove the cost to serve to peak levels. Now, with demand seemingly leveling out from pandemic-era highs, shippers are asking for cost cuts as threats of a recession are on the horizon. However, the carriers who took on the responsibility of adding new assets and paying competitive salaries cannot simply switch off those costs because demand has shifted. In years past, this type of contention has led shippers to remove certain carrier partners from their networks in favor of irrational pricing from others.
The solution for better cooperation? Getting out of the cyclical boom and bust of the industry and taking a longer-term, strategic approach. With a potential recession looming, shippers should be wary of taking aggressive recessionary actions and cutting partnerships. In times of economic downturn, smaller companies and carriers typically take the largest hit. Now is the time to be aligned with a stable partner who can weather carrier volatility and provide immediate capacity once the market recovers.
Working together to understand and ease costs strategically — versus entirely shutting off the firehose — alleviates risk in both a recessionary and a long-term view, helping shippers to control their network better and transport providers to adjust costs accordingly. Although it’s tempting to pull the plug on your existing infrastructure, it’s important to have established carrier partnerships to scale your business when the economy inevitably bounces back.