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August 6 2018

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August 6 2018 | The Journal of Commerce 37 Surface Transportation patience. The key is openness and collaboration." Shippers increasingly are open to contracts of diŽerent lengths, both shorter and longer, depending on the terms. Although most shippers are sticking with annual bids, they're extending terms oŽered to "core carriers," Cubitt said, and trying to experiment with pricing terms. In its bid management program, Transplace is seeing more interest in modified one- and two-year bids. "With the modified one-year deal, shippers bid annually but go to their core carriers and extend terms for another year in return for a lower rate increase," Cubitt said. A similar idea gaining ground is shortening contracts, oŽering a generous rate increase up front in return for a cap on increases in the next contractual period. Clowdis said he has some shipper clients who have opted for six-month contracts that oŽer this type of trade-oŽ. "I have one situation where they went to quarterly contracts, but most are saying let's do twice a year," he said. Such agreements might not save shippers much in the short-term, but they can pay oŽ in the long run, he said. "It's a trading point," Clowdis said. JOC email: twitter: @willbcassidy said. "A large shipper in a recent bid said, 'I've got lanes where I've got a lot of volume. What if I pull those lanes out. I can probably guarantee 60 percent of the volume.' "If there's a base amount of vol- ume that's there 95 percent of the time, they'll oŽer a guarantee for 60 percent of that volume," he said. "It's a good, solid engineering approach. But when they ask a carrier what kind of a discount they'll get for that, the answer is not much at all." With rising equipment, fuel and labor costs, trucking companies don't have deep discounts to oŽer even to customers that strive to be "shippers of choice," Cubitt noted. "Even in good times, truckload carriers have to be competitive to win a lane, and there's not a lot of extra money." Shippers and carriers need to keep the conditional nature of the market in mind when trading guarantees and assessing penal- ties for falling short. They need to define some degree of wiggle room, Clowdis said. "They'll forgive you if you forgive them," he said. "Write that into the contract." Clowdis, a former IHS Markit executive, has been involved in trucking contract negotiations since before deregulation in 1980. Assured volume and capacity contracts are "something we've been doing very selectively," he said. "It takes in capacity," Haber said. "They'll have to risk getting locked into expensive pricing if they want to have that capacity or go the route of setting up dedicated fleets." Clowdis sees a small but grow- ing number of shippers working with their suppliers on assurances that might not guarantee specific volumes or absolute capacity levels, but set a baseline that comes close enough to help secure the capacity and revenue they need. "This is where the smart guys on both sides are going," he said. "The shippers are saying they'll give an assured volume per day, week, or month. 'Here's the highest rate we've ever paid for that,' they'll say, and 'we'll add 10 percent to that and give it to you for a year.' " Some shippers are looking at even shorter-term assured volume deals. "They're willing to give the trucker that additional 10 percent (in price) and promise the volume to the carrier for 90 days, as long as rates never go up more than 1.5 percent," Clowdis said. What does the shipper get in return? A truck. "Gold right now is having an empty truck and a driver to put in it," Clowdis said. "A lot of people think there are not enough trucks out there," Haber said. "There are a lot of trucks that are parked because people can't find drivers." Shippers, Clowdis said, "now are willing to put some skin in the game. They're willing to say, 'We'll assure you of these volumes, and if we don't have them, we'll compen- sate you. If you don't have the truck, you'll compensate us.' They were reluctant to do that in the past." "There are people who are start- ing to say I'd like to have volume guarantees and penalties," Cubitt Shippers are preparing for what appears to be a strong peak season. -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Jan- 17 Feb-17 Mar-17 Apr-17 May- 17 Jun- 17 Jul-17 Aug- 17 Sep- 17 Oct-17 Nov- 17 Dec- 17 Jan- 18 Feb-18 Mar-18 Apr-18 May- 18 Year -over -year change Class 7 and 8 tractor registrations dip but remain high Source: IHS Markit © 2018 IHS Markit Year-over-year percent change in US Class 7 and 8 tractor registrations

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