By Adam Robinson, Director of Marketing & Digital Marketing Consultant at Cerasis
The state of freight management is continuously changing and evolving to reflect the needs of an increasingly complex supply-chain. Such changes are a result of evolution of industries around the planet, and globalization continues to redefine the basic way supply chain software functions. Today, shippers are being forced to do more with less, stay competitive, recognize potential for disruption, and much more. Unfortunately, many shippers fail to realize the greatest advantage lies in innovation and the ability to stay aligned with the latest supply chain technology trends. Strategic freight management trends for 2020 envelope technology, process improvement, the application of data, connected supply chains, and a robust set of dynamic rule sets.
Since the supply chain is continuously evolving, we like to take a moment each year to reflect on the top freight, logistics, and supply chain trends affecting the industry and how they will shape the year to come. For 2020, the strategic freight management trends are nothing short of tremendous. These trends include a gradual shift in the freight economy, the ever-changing role of technology, and state of transportation management as a service. To help shippers stay aligned and ready for the year to come, this article will explore:
- The state of the freight economy.
- The role of 3PL provided technology and services in enabling success throughout the coming year.
- The trends affecting technology-driven supply chain transportation management for 2020.
Freight Economy 2020: Are We Headed for a Recession in Freight or a Boom
Shippers around the globe continue to express concerns for the state of the freight economy 2020 industry. Experts disagree on whether we are heading for a recession or a boom. The reality is simple; organizations that can roll with the changes and adapt supply chain processes will evolve and experience productive years. Unfortunately, those that do not recognize the need to evolve will face vast uncertainty, experience problems with risk management, realize higher transportation spend, and succumb to a perception of recession. To maintain objectivity, let’s take a closer look at whether the freight economy 2020 will go boom or bust.
Indicators of a Freight Recession and Why They Appear
Fears over whether the freight economy 2020 will slip stem from the expectations and events occurring within the trucking market. Weaker freight demand, the pressure to maintain profitability, higher-price diesel, and falling truck and trailer production mixes elude to uncertainty. Meanwhile, the U.S.-China Trade War appears to be approaching stabilization reports Transport Topics, and overall shipping volume is still in correction territory. Of course, it helps to understand the key indicators of a freight recession and why they appear.
- Increasing labor costs. Increasing labor costs are often associated with the onset of a recession indicator, and while higher costs amount to lower revenue, increases within demand and volume can more than make up for such factors.
- Increasing insurance costs. Shippers also tend to look to insurance costs for insight into whether the industry is heading toward recession or explosion. While insurance costs may be on the upswing, shippers still have the advantage of eCommerce growth, which is expected to surpass all prior years
- Demand for faster shipping with fewer total orders. Customers are expecting faster shipping, and the total volume of orders does appear to be slipping for now. However, it is important to consider that the global economy, including the state of logistics due to the coronavirus and the election-year, may confound this indicator.
- Use and investment in private fleets change. Changing the use of fleets, specifically switching between the use of a private fleet versus an outsourced fleet, may also indicate a forthcoming recession. With that in mind, maintaining productivity and keeping freight rates under control will naturally require a balance between private and outsourced fleet use.
- Prices start to fall. Declining freight rates are one of the biggest indicators of the forthcoming freight economy 2020 recession. Viewing the trucking industry exclusively, shippers do see a gradual decline in the cost of shipping. However, those declines are put to the test by higher freight rates in other areas of the global supply chain. Furthermore, lower freight rates are also possible through the infusion of technology that has taken place within the industry over the last few years. As a result, lower freight rates were the end goal for all players.
- Carrier margins go through the roof. Comparable to lower shipping rates, higher carrier margins tend to coincide with higher freight spending rates. However, the same improvements within the carrier-side of the supply chain are finally starting to have an effect.
Why the Freight Economy 2020 Matters Most
According to MarketWatch, the U.S. Bank Freight Payment Index found that total volume and spending on freight transportation fell in the fourth quarter of 2019. However, spending in 2019 was still up 3.9 percent year over year, so light rests at the end of the tunnel. The freight economy impacts diesel prices and vice versa. While the freight economy might not yet be on the brink of collapse, shippers need to realize that the changes within the industry will have a direct effect on operations, including:
- Changing compliance regulations that may require changes to basic supply chain management software.
- Evolving customer demands for faster, “free-er” shipping.
- Changing trade agreements and the need to share data and maintain transparency.
How to Leverage the State of the Freight Economy 2020 Market to Improve Profitability
Shippers that hope to avoid the risks of a recession in 2020 should follow a few best practices:
- Follow the spot rate market closely. Spot rates can help shippers navigate the changes in shipping costs as recession fears climb, and they have the same protective effect against rapidly-changing industry factors.
- Tap into the value of new and retrained talent. More people have realized that the age-old perceptions of the supply chain have changed, and that’s partially why the industry is experiencing a lower unemployment rate. Lower unemployment also means non-traditional supply chain workers are ready to enter the industry.
- Monitor the Modal Indices. Freight Waves publishes a series of transportation stock indices, and the LTL index recently rose 6.5 percent. Parcel and truckload rates rounded out the lower tiers with 0.3 and -0.1 percent. In other words, the industry is having a balancing moment. Understanding and recognizing the balancing between modes will help shippers refine their strategies.
- Use technology, i.e., automate transportation management. Automation and technology are essential to staying above water with fears of a recession on the horizon. Continue investing and deploying newer technologies and capabilities to stay successful.
3PL 2020 Trends: The Year of Tech and Services to Move Shippers Forward
Recently, 3PL Central had the honor of sponsoring the annual state of third-party logistics (3PL) report. The report identified key trends and movements within the industry, and the top 3PL 2020 trends include 3PLs leveraging technology and software as a service (SaaS) models to enable continuous growth. The top 3PL 2020 trends include a major prediction to achieve a balance between shippers and carriers, and as 86 percent of U.S. shoppers rely on at least two channels for their purchases, opportunities within the 3PL industry must reflect the changes and requirements of eCommerce. To achieve this feat, shippers need to start thinking about deploying the top 3PL 2020 trends as they relate to technology and services.
Connected Technologies and More Services Will Define the Top 3PL 2020 Trends
Connected technologies will continue to redefine the standards for 3PL 2020 trends. It is no longer enough to simply offer competitive pricing for shippers. Carriers realize the real potential in moving freight, as well as 3PLs in this instance, lies within the use of analytics. With more data flowing through the supply chain, the opportunities for improvement and gains within analytics are significant. Of course, analytics engines require extensive resources, advanced business algorithms, artificial intelligence, and machine learning to succeed.
3PLs Will Turn More Attention to Artificial Intelligence and Machine Learning
Advanced technologies and services within the top 3PL 2020 trends, must include a mention of the evolution and potential of blockchain, the internet of things (IoT), artificial intelligence (AI), and machine learning. As these technologies’ potential grows, more 3PLs will look to deploy new systems and capabilities that leverage these advanced technologies. In other words, more technology within the supply chain will enable massive gains in productivity and efficiency. According to iTexico:
“For AI to make a positive impact, it should be integrated with other technologies. For instance, self-driven vehicles might not make much sense without IoT working with AI. The IoT activates and regulates the sensors in the car that collect real-time data, whereas the AI models are what the vehicle needs for decision making. Likewise, Blockchain can work closely with AI to address security, scalability, and trust issues.”
Of course, the notion of self-driving trucks remains a unique trend as well.
The Autonomous Trucking Trend Will Continue to Undergo Development
Autonomous trucks have remained a primary trend identified in recent years’ articles at Cerasis. According to Bernard Marr of Forbes, trucking technology developers are expected to further undergo maturity in 2020. The industry expects big changes to the laws governing the use of autonomous trucks, improvements to existing infrastructure, and the changing perception that autonomous driver vehicles are the more effective and safer solution. The idea of autonomous trucking is the most advanced and comprehensive opportunity to radically scale the supply chain and meets changing demands. Unfortunately, autonomous trucks are still in development, and 2020 shows no signs of bringing autonomous trucking to the masses. At least not in the perception that media makes it appear. So trucking companies and 3PLs still need to focus on meaningful, realistic improvements through available technology, such as a TMS, to help drivers and managers better manage freight.
Integrated Services Will Replace Traditional Siloed Services
The introduction of siloed services by 3PLs has been among the top 3PL trends for all years passed. That expectation was on track to continue for the 3PL 2020 trends. However, the trends unique to 2020 naturally imply that connectivity between systems will replace the age-old standards powering 3PL services. This is especially true among the 3PL services that are typically categorized as a 4PL, such as accounting and auditing software. Instead of offering these services as standalone systems, more 3PLs will look to leverage integration to build the value-added services within their fundamental workflows and software. Yes, integrated services will probably replace traditional siloed services and require shippers to further leverage the potential of available 3PL partnerships to maximize efficiency, productivity, and profitability. Consider this; integrated picking, packing, and shipping software reduces the costs and eliminates the lost time and inevitable errors with manual input.
Freight and Transportation Management Trends for 2020 to Know
The transportation management trends for 2020 reflect a growing consensus that new technology and visibility will define the successes of the future supply chain. Adoption rates for new services and cloud-based technologies are climbing, and the global transportation management system (TMS) is expanding. In fact, according to FreightWaves, the global TMS market will achieve a compound annual growth rate of 19.13 percent through 2024.
Also, as further demonstrated by Gartner, “companies will spend $1.94 billion on TMS applications by 2022, with Software-as-a-Service products accounting for 65 percent of that. Clearly, companies expect to leverage TMS even more than they do today. From reduced transportation spend to better management of routing and the automation of freight auditing and payment processes, the modern TMS must do more than record time and place of shipments.”
Spot Rates Will Decline Throughout 2020
The trucking spot rate market is also changing in the wake of trends within the industry. The spot market reacts to available supply and demand. As demand changes to reflect limited transportation capabilities due to the coronavirus and its potential association with an unknown mode of transmission, spot rates will change. With all the talk about modes and transmission, it can be confusing to keep medical terminology and logistics terminology separate. Here’s what you need to know. Researchers do not yet know exactly how the coronavirus is spread, and until they have a finite point of transmission, uncertainty will remain as to whether trade routes affecting products deriving from China or the Asia-Pacific region itself will be subject to new regulations or standards. In other words, the spot rate market is on the verge of bottoming out due to the vast uncertainty regarding the coronavirus, and the election cycle only adds insult to injury. Spot rates across the board are shrinking, which is also exhibited in the following FreightWaves’ graphic:
Shippers Will Start to Recover From the U.S.-China Trade War
The massive fears and problems deriving from the U.S.-China trade war are finally starting to ease. A new trade agreement has been reached, and hope is on the horizon. However, to ensure shippers do not fall victim to yet another problem resulting from politics, more companies will turn to TMS software to make hard decisions based on facts, not political uncertainty and promises.
Transportation Management Trends for 2020 Include Increased Adoption of Cloud-Based Systems
The biggest transportation management trends for 2020 will revolve around the use of cloud-based systems. Cloud-based platforms leverage a software-as-a-service (SaaS) model to effectively give companies unlimited scalability and a hassle-free way to use innovative IT resources. The results are clear, and companies that have deployed cloud-based platforms realize higher profitability and returns that far exceed traditional, on-premise TMS capabilities.
Load Tendering Automation Will Improve Efficiency and Enable Balance
Automation will form another key trend for 2020. Automation is everywhere and in all supply chain processes. It allows for driverless forklifts and trucks. It handles exception management. It opens the doors to faster processing of data to route shipments more effectively and recognizes when spot rates are more cost-effective than contracted freight rates. Load tendering automation will stand apart in 2020 and help shippers maintain balance.
AB5 Will Have a Minimal Influence
Considering that most carriers are comprised of fleets with five or fewer truckers, the recent passage and enforcement of California’s Assembly Bill 5 (AB5) would seem to present new risks to the trucking industry for California truckers. The law reclassifies most independent drivers as employees, adding yet another series of regulations that truckers must follow. However, some in the industry are optimistic that the impact of AB5 is minimal currently since the regulation is being challenged in courts. But if AB5 were upheld it would raise operating costs for carriers, but not to the point it will drastically impact shippers.
What Shippers Need to Do Now
Outsourcing is now the go-to best practice for supply chain leaders in need of added help in managing all aspects of a business, particularly packaging design, warehousing, and transportation, as well as a series of value-added, 4PL services, such as accounting and auditing processes. Outsourcing will be among the biggest, if not the biggest itself, transportation management trends for 2020. As reported by Georgia Wilson via Supply Chain Digital:
“In a study completed by Gartner 45 perecnt of its respondents are now looking for 4PL services. Outsourcing has, over the years, become mainstream 80 percent of Gartner’s participants plan to significantly increase their logistics outsourcing budget to more than just warehousing and fulfilment in 2020, not only to optimize cost but save money too.”
Summary: Strategic Freight Management Depends on Your Ability to Roll With the Punches, Deploy Technology, Collect Data, and Stay Forward-Looking
Strategic transportation management trends are simple. They range from more technology in freight management through improved understanding of global freight trends. As the freight market continues to change throughout the coming year, shippers need to implement the technologies and processes that promote efficiency, productivity, and savings. Now, there are real fears over whether the industry will hit a breaking point and collapse. With that in mind, there’s really no telling if the industry will go boom or bust in 2020. Shippers need to realize that the deployment of data, technology, and innovation will combat the effects of the potential freight recession within the freight economy 2020 cycle. It’s an oddity. Recession fears remain, and shippers can avoid the topic entirely by simply staying proactive in management.
Staying proactive with new technologies and services of 2020 has a common theme. All trends seek to provide more visibility, proactive management, and better profitability for all TMS users throughout 2020. For customers, the effects include better customer service, faster shipping, seamless shopping experiences, and major gains in public trust and loyalty to certain brands. To maintain success, shippers need to start thinking about how their operations will benefit from the top 3PL 2020 trends and how 3PL innovations will enable competitive advantage. In addition, the ability to speed deployment of new technologies and services, including both in-house systems and outsourced platforms, will determine success. Fortunately, 3PLs, including Cerasis, are now even stronger with GlobalTranz’s acquisition of the transportation management company to add even more capability to shippers, and have spent years developing new capabilities within SaaS platforms to offer a bigger, better, and more effective way to approach logistics management. Ironically, that fact alone is part of the reason why outsourcing is now the go-to best practice for freight management.
Bio: Adam Robinson oversees the overall marketing strategy for Cerasis including website development, social media and content marketing, trade show marketing, email campaigns, and webinar marketing. Mr. Robinson works with the business development department to create messaging that attracts the right decision makers, gaining inbound leads and increasing brand awareness – all while shortening sales cycles, the time it takes to gain sales appointments and set proper sales and execution expectations.