By Adam Robinson, CEO of The Robinson Agency
Demand for a more efficient supply chain continues to grow. The industry is reeling from the ongoing effects of the pandemic. According to Intelligent Audit, “It is no surprise that the global pandemic had a devastating impact on the world’s supply chain, with more than 75 percent of businesses saying they had at least one significant negative impact directly caused by the pandemic over the past 18 months.” Across the board, carrier rates are climbing, and shippers know that finding capacity is much more than simply offering the right rates—they must find a way to make their freight more attractive and easier to haul.
Yet, the demand for more isn’t isolated to shippers. Customer expectations and behaviors have further stimulated the industry. The digital freight marketplace, newtrul, noted a 130 percent increase in demand for capacity in June 2021, but that kneels in comparison to the growth witnessed over the later half of the year. “US e-commerce sales from November 1 to December 24 grew 11 percent from the same period of 2020 in comparison with a hefty year-on-year increase of 47.2 percent in the holiday season of 2020,” reported Business Standard.
E-commerce demands, paired with more customer spending overall, have created a new strain on the supply chain. For months, the stories of stock-outs and empty store shelves have permeated mainstream media. Finding the light at the end of this tunnel in demand means understanding what’s happening in the industry and the truckload trends affecting the industry.
1. E-Commerce Demand Will Have a Profound Impact on 3PLs, Forwarders
Much of the demand for more leads to an increased shipper need for diversity. Like any classic storybook, diversity is not something gained overnight, and it comes in tandem with embracing cultural differences, but those differences require a plan to ensure clear communications.
Remember that misunderstandings are the antagonist of diversity in the supply chain. As more companies turn to 3PLs, freight forwarders, brokers and the like, shippers will need to ensure their needs are clearly conveyed. That’s where a strong understanding of like terms, i.e., Incoterms, is critical to enabling e-commerce fulfillment. Nathan McGuire of Wicker Park Logistics said, “The shipping industry in 2022 will be under the microscope as global trade ramps up to meet the demands of e-commerce.”
Remember that the industry processes millions of requests using available shipping methods such as slow vessels, barges, and airplanes. Still, it will involve all sorts of intermediary companies and stakeholders, including warehouses, railroads, ports, and finally, delivery services and cultural differences between areas will see more interest in renewing or changing the standards of Incoterms.”
McGuire’s views reflect the need to stay vigilant and work together toward a common goal and doing so without confusion. In a sense, that’s the whole premise behind the push more transparent freight management processes, integrated platforms, and collaborative resources.
In so doing, shippers are able to differentiate their businesses, creating a competitive advantage by always delivering on time and in full, which was further explained by Turvo: “the customer may not always know what they want, and customer demands will always drive industry services and offerings. Remember that what the customers will look for is based on their needs. And this becomes particularly true when it comes to making the most of a supply chain competitive advantage.”
Still, e-commerce growth also means TMS hold-outs will need to create a strategy for better transportation management. Turvo already has made this capability with a system that can function almost as a TMS on its own right, but Turvo can also easily integrate data from all other platforms, including the MercuryGate TMS and well beyond. And that unity is critical to unlocking more growth in omnichannel too.
2. Omnichannel Will Get More Spotlights and Lead to More Truckload Demand
With the relentless push for more from e-commerce, it’s easy to overlook what’s happening in brick-and-mortar retailers. The ability to offer a wider range of goods and getting those goods to customers depends on a wide network of possible fulfillment centers. In recent years, using brick-and-mortar stores as distribution centers has become a new standard. Walmart is an expert at this capability, and Target has also gotten into the mix with more investments into its online ordering and pickup capabilities in recent years.
There was a time when multichannel freight management and fulfillment was the gold standard. However, today’s customers want all-encompassing experiences that seamlessly blend from in-person, online, emails, texts and every other interaction into a unified activity. That’s the whole premise of omnichannel, and with the increased demands on the industry, shippers will also need a seamless experience that transcends all modes.
This omnimodal capability has been recently discussed by MercuryGate, lending itself to better chances of becoming a preferred shipper, lower transportation costs, and increased throughput.
Further, the ability to visualize and manage the full supply chain provides more insight into what shippers should offer when tendering a load. In turn, carriers can rest assured that their rates are competitive, saving precious resources in searching for loads and boosting shipment execution. Those functions will become the cornerstone of all freight management improvements going forward, especially in the freight brokerage work.
More visibility and faster capacity procurement are symbiotes in freight, but shippers need solutions that can have a meaningful impact immediately. As noted by Pamela Nebiu of Edge Logistics, “Shippers do not necessarily have the resources to build load matching and automation platforms in house, and even if they did, why would they take on such a responsibility when off-the-shelf solutions such as Edge CAPACITY are ready to roll on day one? In essence, brokerages create technology-as-a-service for users to avoid the hassle of homegrown development while also giving rise to a near load board-like service and solution.”
For truckers, such capabilities may not seem like game-changers in 2022—where transportation rates are at all-time highs, but the rebalancing of power between carriers and shippers means they need to be ready. Truckers need to safeguard their long-term profitability by working with companies that enable omnichannel and omnimodal fulfillment through visibility, and truckers can further use that visibility to maximize profits too.
3. Ocean Freight Rates Will Drive Increased Demand for Truckload in Drayage Services
The late summer and fall of 2021 will be remembered as the time port backlogs grew so severe that they could be seen from space. As the turmoil on the west coast grew, other ports along the east coast saw a spike in demand. The Georgia Ports Authority, operating the Port of Savannah, announced new plans to increase capacity for imports, explained Port City Logistics: “The GPA announced plans [in late 2021] to develop 18 nearby acres to add 400,000 TEU capacity to Savannah terminals.” But that growth means the traditional standards of operating no longer worked, leading to delays in returning empty containers to port and having the net effect of creating a worsening container capacity crunch. Now, Port City Logistics further recently joined forces with Turvo, putting the power of collaborative resources to work to rebrand and prepare for mounting demand in the industry.
Still, the need to keep an eye on all freight industry trends, even when a shipper isn’t necessarily liable for the freight, is especially important. There is some hope as overall demand for container capacity in ocean declines, but the declines are not nearly enough to truly lower overall truckload rates.
Consider the state of ocean rates today.
Drewry Shipping Consultants noted, “Drewry’s World Container Index composite index decreased marginally by 0.2 percent to $9,359.10 per 40ft container but is 80 percent higher than the same week in 2021. Freight rates on Shanghai – New York grew two percent or $310 to reach $13,437 per feu. However, rates on Shanghai – Los Angeles and Los Angeles – Shanghai fell one percent each to $10,437 and $1,250 per 40ft container respectively. Similarly, rates on Rotterdam – Shanghai and New York – Rotterdam dropped three percent each to reach $1,396 and $1,235 per feu respectively. Rates on Shanghai – Rotterdam, Shanghai – Genoa and Rotterdam – New York hovered around previous weeks level. Drewry expects rates to remain stable in the coming week.”
For example, ocean freight rate increases amount to greater cost of transportation. Limited container capacity will inevitably mean shippers will start looking for alternate fulfillment models, including air freight. Like all forms of transportation, there will inevitably be an over-the-ground leg somewhere.
4. Limited Air Freight Capacity and Rising Demand for Expedited Cargo Pick-up Will Stoke Truckload Rates
As overall cargo volumes rise, especially as the labor shortage continues—another effect of the pandemic—the ability to maintain throughput will be at stake. Increased employee call-outs, whether due to illness, COVID exposure or other factors, have led to airlines to cancel many flights. Those are the same reasons for part of the massive backlogs that arose in ocean shipping. And market rates are indeed indicative of a greater demand in air freight rates.
Following a short dip for the week ending January 2, 2022, air freight rates appear to be on an upward trend. According to the Freightos Air Index (FAX), global air rates were at $4.72 per kilogram ($2.14 per pound) as of February 6, 2022. That may not seem like a major hike compared to the apex of $5.36 per kilogram the week of Christmas 2021. However, air freight rates for the first week of February 2021 were $3.20 per kilogram. That’s a 47 percent year-over-year increase.
There’s also expedited trucking impacts to consider. Air freight is speedy by nature, but that speed depends on the availability of expedited carriers to find drivers, share documents, and get the freight moving. Increase air freight inevitably leads to higher demand for the premium services of expedited trucking across the continuous U.S. That nationwide demand for more premium services also led Brian Kempsy, CEO and Co-Founder of Port X Logistics to create Carrier 911, ensuring over-the-road capacity for shippers forced to turn to air freight that do not know what to expect.
If starting an entire company says anything, it’s that the industry is evolving and needs a better solution. That demand for air freight pickup and delivery is so high that it’s worthy of its own service, not some hodge-podge of resources that cannot share information and have trouble engaging with other network partners.
5. Rising Fuel Costs and Global Plans to Lower Emissions Will Lead to More Tech in Freight
Fuel. It has been a topic of contention for years, and since the start of the Biden Administration, everyone has been weary of what will happen regarding regulations and sustainability. Fuel costs are rising and impacting freight too. According to the U.S. Energy Information Administration, On-Highway Diesel Prices are up to $1.15 more on February 7, 2022 compared to the same date in 2021.
Yet, today’s freight companies realize that sustainability is no longer only about politics or total cost of fuel. It’s not a current price-per-gallon issue; it’s a humanity issue. And rising fuel costs can only ignite fires for more optimization and efficiency.
We can easily remember the words of Greta Thunberg’s 2019 mass call to action to address climate change: “The eyes of all future generations are upon you. And if you choose to fail us, I say: We will never forgive you.” Those were strong words, spoken by a strong person, wise beyond her years, and those same words have given rise to endless conversations, renewed hopes for emissions reductions, and plans to lower costs. In an industry like freight transportation, any conversation about the impact of burning fossil fuels can be uncomfortable, but here’s the reality.
The industry is indeed moving forward with new technologies and capabilities to still get freight from A to B without sacrificing efficiency. The advancements of technology have given carriers the ability to track drivers in real-time, and intuitive systems are helping to reroute freight in real-time. MercuryGate spoke about the use of such technology in what’s undeniably one of the biggest emissions drivers in logistics—the final mile: “Leveraging dynamic rerouting in final-mile delivery service provides shippers with a stronger degree of control. Shippers can more easily track shipment status and make meaningful carbon footprint reductions within the final mile.”
Creating new value in the supply chain means doing not only more with less, but doing fanatically more with fewer emissions, building optimization through and through.
6. Autonomous Trucking Is Still a Work in Progress
There has been a growing consensus that automation in freight will one day see thousands of driverless trucks on the roads, and the human elements in today’s cabs will enjoy the perks of working remotely. Robotics are indeed the future, but autonomous trucks and driverless cars have faced an uphill battle. Aside from the fears of the robot apocalypse, there’s some uncertainty and ambiguity behind the legality of going driverless and the technology to ensure its safety. However, more of the brands behind autonomous vehicle development are looking to advance their capabilities.
In December 2021, Embark announced an expansion into Texas to further develop a driver-out pilot in 2023, reports CCJ Digital: “Texas is the center of America’s trucking industry, and it’s the perfect home for Embark’s expanded operations. We’re excited by the talent and entrepreneurial spirit that Houston has to offer,” said Stephen Houghton, Embark chief operations and fleet officer. “Our new footprint in Texas will support our growing network of partners and fuel our rapid growth across the Sunbelt. As we scale our operations, we will continue to work closely with local and state governments and other organizations so that we improve the safety, sustainability, and efficiency of trucking with autonomous technology.” Houghton’s words echo a growing acceptance of driverless trucking, but his words also give rise to a key factor—multi-level governments involved in autonomous trucking.
Unfortunately, the patchwork of laws, rules and regulations make creating a nationwide or global driverless future blurry. Still, the premise is strong.
Consider this fact: One of the main benefits of autonomous trucks is cost reductions. Driverless trucks can save money on labor costs because they don’t need a human driver. They can also save money on fuel costs because they can optimize their routes and avoid traffic jams.
Ergo, the cycle becomes self-propagating, creating more technology-rich transportation standards and still finding a way to do fanatically more with less, curb emissions, and reallocate resources to alleviate total impacts across all forms of transportation. And this is only one mode, so imagine the potential as aerial drones become more mainstream in freight. Together, it means that 2022 will be a year in which automation begins to reshape the standards and expectations of an effective, efficient and optimized freight transportation industry.
7. RPA Will Further Enable Management by Exception in Freight
The conversation of autonomous trucks leads to another use of robotics in freight—virtual robots. This capability is known as robotics process automation (RPA) and is found in almost every major brand’s online presence. It exists as chatbots and email response bots, and those functions are becoming more mainstream. The remainder of 2022 will see more development and uses of this technology to reduce rework and help freight management parties do much more with fanatically less.
There’s a great reason behind that too, an unimaginable ROI of RPA.
As reported by RPA Labs, “The incorporation of technology into daily living has provided massive opportunities for workflow automation. Companies automate workflow by streamlining routine tasks into an efficient, connected system. Yet, just as the Jetsons predicted, that’s not all that can happen in the twenty-first century. Today, companies can use all sorts of technological tools to create more data-driven processing that puts time back in the pockets of freight moving America.” The wide uses of RPA are thereby responsible for generating up to a 200 percent ROI within the first year, and the growth potential is exponential.
Summary: 2022 Will Start the 5th Industrial Revolution
The rest of 2022 is still uncertain. As the omicron wave starts to dissipate, there will be risks for another variant. There will be more demand in freight capacity, and everyone will need to work smarter, not harder. That’s where all the technologies and advancements of freight management have an opportunity to shine. And those that take the time to know what’s happening will be better equipped to put such technology to use, derive better results, and roll with the punches in the changing logistics landscape of 2022.
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Bio: Owner at The Robinson Agency: A B2B Marketing Agency for Supply Chain, Logistics, Facilities, Restaurant Tech
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