Rise Above Transport Market Volatility

June 17, 2024

Rapid shifts in market conditions have led to significant challenges for the transport industry in recent years. Ongoing turmoil has exposed the vulnerability of an industry where companies often race to the bottom, cutting prices to unsustainable levels. For freight professionals, navigating these volatile times requires a strategic focus on operational efficiency, customer value, and leadership transparency.

One of the industry’s most damaging practices is undercutting prices to win business. Selling services at a loss might secure short-term gains, but it’s a losing proposition in the long run. Companies must ensure their pricing strategies cover operational costs and generate sustainable revenue. Failing to do so jeopardizes the entire industry’s health. As seen with the recent high-profile collapse of major players, shocks to the market carry consequences that ripple across the industry, affecting carriers and shippers alike.

“It finally broke when the Korean government let Hanjin go belly up and all hell broke loose,” says Glenn Koepke, VP of Enterprise Accounts at Vector. “But why on Earth did we let 20 companies chase to the bottom dollar, wreck an industry, and cause havoc?”

To remain competitive without resorting to detrimental price cuts, transport operations need to maximize productivity. Key metrics such as shipments per person per day can highlight inefficiencies. It’s essential to analyze why certain tasks require more touches and to streamline processes. If shippers are causing additional work, implementing accessorial fees can offset these costs. Ensuring that every activity adds value to the customer is crucial; otherwise, it should be eliminated or restructured.

How can freight brokers determine the right pricing strategy to ensure profitability? Find the answer to this question and more in the latest episode of the Stay In Your Lane Podcast.

“Go deeper into your processes. Whatever you’re doing, would a customer pay for you to do this activity? Is this bringing value to the customer?” asks transport industry veteran Joe Lombardo. “If that activity wasn’t bringing value, either A, you stop doing it, or B, you change it.”

Freight pros must also distinguish between essential services and those that add no value. This distinction becomes especially critical during lean times. By concentrating on value-added services, stakeholders can better justify their costs to customers. This approach not only helps in maintaining profitability but also strengthens customer relationships by demonstrating the tangible benefits of the services provided.

Likewise, not all customers are equally beneficial. It’s important for companies to identify and commit to customers who align with their business model and long-term goals. Walking away from non-profitable customers allows a company to focus resources on partnerships that offer mutual benefits. This selective approach ensures stability and growth, even in fluctuating markets.

Leadership plays a pivotal role in navigating tough economic times. Strong leadership will allow a company to maintain its workforce, which in turn fosters stability and loyalty between the company and its clientele. Transparent and empathetic leadership is key. Leaders should avoid isolating themselves and instead engage directly with their teams, acknowledging challenges and working alongside employees to find solutions.

“You manage by walking around. You’ve got to be on the floor every day. See what the people are doing, listen to them, and see if you can give them some guidance on the problems they’re having,” says Lombardo. “Sitting at your desk with the door closed doesn’t cut it anymore.”

Alongside leadership, creating a positive work environment where employees feel valued and supported is essential. When teams are motivated and work well together, the company can better weather market disruptions. This camaraderie fosters innovation and resilience, turning potential challenges into opportunities for growth.

Understanding market trends and preparing for inevitable shifts is another crucial strategy. Interest rate hikes, for instance, can significantly impact the freight industry. Companies that overextend themselves during favorable conditions may face severe repercussions when the market tightens. Staying informed and adaptable allows transport professionals to mitigate risks and capitalize on opportunities.

In an industry fraught with volatility, freight companies must adopt strategic approaches to ensure long-term success. By focusing on sustainable pricing, providing value-added services, and fostering strong leadership, companies can navigate the complexities of the market. As the market continues to evolve, those who prioritize these strategies will be best positioned to succeed. Triple T Transport’s commitment to these principles has enabled it to thrive without resorting to layoffs, demonstrating the power of a well-considered and empathetic business model. Partner with us today to experience the benefits of industry-leading 3PL services.

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