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Article Excerpt
Shipping departments in the metals industry say they struggle daily to hire enough trucks and drivers to take their loads and make their deliveries, and many are paying a premium for these basic services. Shippers who want multiple pickups and multiple deliveries, and those who allow trucks to idle at the docks, may face delays of several days before a carrier will deign to work with them. All are seeing stop and detention charges rise dramatically.
A freight broker, three carriers, a logistics technology expert and three service-center transportation and logistics managers discussed with Metal Center News the causes and effects of today's high freight rates and the overall transportation crisis.
"We have seen estimates of 5 to 25 percent increases across the board that the industry is setting for shippers' freight rates," reports Mark Shary, president of Best Transport.com, Columbus, Ohio, which provides Internet-based logistics services and solutions.
"In the metals industry, depending on the commodity, the freight cost can be from 4 to 8 percent of the cost of goods sold. If freight costs go up 15 percent, that can translate to 1 percent of all costs of goods sold." For metals companies operating on very tight margins, that can be the difference between making money and losing money, Shary says.
"The good news is people know this isn't carriers gouging shippers, and that it's a necessary cost of their business. They also operate on relatively thin margins, and have no choice but to pass costs on," he adds.
Because demand so far outstrips the supply of truckload capacity, it's tough for shippers to get trucks. "They're commanding a premium, paying more for freight than they used to," says Jim Baber, vice president of TKX Logistics Inc., a unit of ThyssenKrupp Materials NA, Detroit.
Donald K. McGaughey, corporate director of transportation for TW Metals, Exton, Pa., cites additional, less obvious causes for higher freight rates.
"Liability insurance costs have risen 15 percent each year during the past two years. Then there's the cost associated with the new lower emission engines mandated by the EPA, which took effect last October. There was also an increase in highway tolls as state budgets went into the red. It costs us $36 a day to cross the bridge into Long Island," he notes. Since 9/11, with the Department of Homeland Security dictating increased security measures, security costs have grown, too.
ECONOMIC PICKUP
"With the economy coming back the past six months, we are in a world of hurt," says Lance Craig, president and chief operating officer of Craig Transportation Co., Perrysburg, Ohio, and chairman of the Truckload Carriers Association, referring to the growing demand for carrier services and the carrier industry's inability to meet it.
"The economy is improving, so everyone's demand shot up at once. There weren't enough carriers to handle a modest increase, let alone the kind of increase we're seeing right now," says Brian Yamaguchi, transportation and logistics manager for Earle M. Jorgensen Co. in Schaumburg, Ill. "For months, we have had very large [metals] suppliers who struggle weekly with 10, 20, 30 loads sitting on the docks that they can't find trucks for."
"Trucks are at a premium today," agrees Tom Eatinger, vice president and general manager for the Area Transportation Division of ADS Logistics, Munster, Ind., which operates about 400 tractor-trailer units and...
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