Carriers should take advantage of strong rates while assuming the favorable cycle will eventually fade, using the temporary tailwind to strengthen the business before conditions normalize.
Economist Noel Perry told Transportation Intermediaries Association attendees to “take as much as you can” in rates from shippers but not to bet the company on 2019 being equally strong.
KSMTA had reached a similar conclusion in its earlier article, “Maximize Value in the Short-Term for Long-Term Gains.”
Work on the Business During the Upswing
A strong freight market creates room to address structural issues that are difficult to fix when cash and management attention are under pressure.
Carriers should not settle for temporary price improvement. They should use the favorable period to work on:
- Growth strategy
- Key operating-factor improvement
- Profitability
- The strength and depth of the management team
- Driver capacity
- The freight network
- Information-technology infrastructure
- Meaningful performance metrics
Build Short-Term Cash and Long-Term Value
Improving those foundations can create immediate profit and cash flow. It can also increase the company's long-term exit value by producing a stronger operating history and a business less dependent on one unusually favorable market.
The warning was not that the industry would necessarily collapse in 2019. It was that carriers should not make permanent commitments based on a temporary peak.