Saturday, June 12, 2010

US Trucking Concerned By Wal-Mart Shipping Policy

Change of Direction May Roll Back More Carriers
Shipping News Feature

US – Reports in the press this week indicate that the giant Wal-mart chain may be changing its policy with regard to deliveries from its hundreds of suppliers. It is quite common for large corporations to switch transport and warehousing strategies every few years, often following management changes. After a review companies which handle their own logistics often conclude that a specialist supply chain company would be more cost effective and palm off property and staff in an effort to reduce costs. A few years later someone concludes that the subcontractor is growing fat on the proceeds and an ‘in house’ operation would raise extra revenue, and so the cycle continues.

The Wal-mart scenario, whilst not precisely like this, bears the same hallmarks in that with almost 7000 trucks the marketing giant has doubtless found itself with spare transport capacity during the downturn and has taken the view that by utilising their own vehicles for collections from suppliers they will get a free ride. This effectively means goods purchased by Wal-mart will switch from a free delivered basis to ex works or subcontractors will simply get less business from the company.

The problem for the nation’s full load trucking and less than truckload (LTL) carriers is simply that many of them are struggling still with much reduced revenues and for companies such as Greatwide Logistics and Con-way Freight, as well as myriad smaller outfits, the loss of any revenue will prove difficult. Wal-mart have reportedly dressed the plan up as a clever marketing strategy to increase sales and told their suppliers it will lower their own costs. As many suppliers traditionally add in a profit factor for free delivered consignments it is hard to see how this is the case.

In the hard pressed world of freight trucking most hauliers will be left with the option of lowering rates still further to ensure continuity of business or losing out and holding on in the hope that Wal-mart will find life is not so easy when you try to pack in too many tight schedules. This can be counter productive when your formerly friendly trucking buddy starts to charge ‘special’ collections for the time sensitive stock replenishments which simply don’t get done because your own drivers are just too stretched.