I was reading over the weekend throughout various industry trade publications and it appears that we are on an upswing in regards to the transportation industry.
The current freight demand is stronger than supply. This is revealing itself in the spot market and should migrate into long term contract rate negotiations in the future. The spot market tends to swing more abruptly than long term contracts. The question is how long will it take for increased rates to transfer over to long term contracts.
In my business, I’ve mainly held to longer term contract freight arrangements. These have proven to be more stable in the long
run. It can be difficult to watch the spot market increase rapidly like a sugar rush on a five year old child with higher rates however this market can quickly sour at any point in time. It’s important not to abandon those customers who have taken care of you during the slow times and kept you rolling. The spot market can be tempting but a core group of consistent contract customers will keep your business healthy.
With the overall economy picking up, we tend to get excited about rate increases and profitability. We must remember to be
vigilant like the squirrel and make sure we collect and maintain enough nuts for the long cold winter (slow) months ahead. One thing is for sure… we know the slow months will come again. Each of us want to take advantage of the upswing however we must be sure to put some reserves back and not over extend our budgets. Balance will be the key to weathering the next storm.