THE PARADOX OF PRICE
After years of steadily growing volumes, the transportation industry was one of the first sectors of the real economy to suffer the effects of the credit crunch. Because transportation companies, as in most commoditised industries, rely heavily on price as a key differentiator, rates were cut in a desperate attempt to maintain volumes when utilisation levels spiralled downwards. Now, almost two years after the trough of the crisis, trade volumes in many market segments are still recovering and incumbents are battling for their share of market growth. But with prices in many cases still below pre-recession levels, and profit margins – already very modest at the best of times – wafer-thin throughout the industry, 'buying' volume simply by cutting prices is clearly not an option. So, is there a way out of the pricing paradox? We suggest that now is the time to get smart and understand and exploit a long-time headache inherent to transportation – from container shipping to public transport to local distribution of retailer merchandise: network imbalances.
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