First, he is right, I read a recap and did not listen to the entire webinar so today I went back and listened to the entire replay. My opinion does not change and here is why.
The point I was making in my post is threefold:
- FTR and the "industry" very frequently report "now it is soft" but they predict "sometime in the future" capacity will tighten up and rates will spiral up. (This was exactly the position taken in this webinar)
- They talk about it as if it is very homogeneous when really it is a lane by lane, area by area phenomenon.
- The carriers use this "in the future" research to spin their sales pitch. Any shipper knows the pitch goes something like this:
Shipper to carrier: "Wow, seems real soft now and rates have come down in the spot market (per FTR), what can you do to help lower my contract rates?"
Carrier to Shipper: "Well, yes, may be down now but look at the research (provided by FTR and others), capacity in 2016 is going to tighten dramatically and when that happens rates will spiral up. You, the shipper, need to stick with us now (maybe even give us a cost increase) and we will "stick with you" when spiraling rates occur.
Now, what comes of this:
- Shipper gets scared (thus the fear trade).
- Shipper pays more now as "insurance".
- The "insurance" never pays off (either the spiraling rates never occur or if they do, the carrier is still back at the table asking for more money).
OK, so why am I so skeptical of this scenario? It is really all about who the clients are of any consulting organization. I do not believe you can serve two masters .. absolutely impossible. Yet, some consulting companies try to do this. Imagine this scenario:
Consulting company "A" gets 50% of their revenues from the carriers and is about to go to market with the following research:
- Trucking capacity is loose and rates have softened dramatically
- This is going to exist into the foreseeable future. We are "long" on the recovery and all indications are a recession is upon us (commodities are slowing, etc.).
- Shippers should use this as an immediate opportunity to ask for rate reductions to stay competitive. Prices are about to fall.
What do you think would happen to the "50%" of the revenues that are paid by trucking companies? I will leave you to answer this question.
I want to be clear: I think FTR produces the best research in the industry and it is a "must" listen to and a "must read" for anyone dealing with the shipping industry.
I am merely saying you need to combine this with other research and, more importantly, what you are empirically seeing in the marketplace to determine your overall transportation procurement strategy.
NOTE: My comments about "serving two masters" are the whole idea of where the fiduciary responsibility lies. Think of your investments. If your investment advisor is paid for, in some part, by a specific mutual fund do you think that investment advisory can truly be "neutral" and "agnostic" in his or her advice? Again, I leave it to you to answer.