By Adam Robinson, VP of Product Marketing at FreightWaves
Let’s hit pause for a moment. Stop all the chaos of freight management, and take a moment to think about the trucking market’s consistency. Yes, it has asked the industry for more in recent months, but what about before the pandemic? What happened to the typical expectations for rising versus falling? Those standards remain and are inevitable. Change is the only immortal aspect of freight management, and it’s time to assess the state of trucking market disruption.
Why? Well, there are plenty of issues coming to the forefront today. Political instability, Brexit, pent-up consumer demand, spot versus contract considerations, and more complicate freight managers’ duties and add more transportation data to the industry. And to that end, this article will delve into a few of these disruptive influences and what shippers and trucking companies can do about them.
Death to Contracts and Spot Market Assumptions; Long Live Strategic Positioning
Figuring out whether to post loads to the spot market or take advantage of contracted freight sounds great on paper. The problem is that the idea rarely becomes a reality in the fast-paced trucking market. Spot rates still reflect that all freight is bought and paid for on the spot, meaning even those with the best-contracted freight rates available are at the mercy of spot influences.
The key to avoiding delays and ensuring ample capacity lies in foresight; looking to market indicators and signals that allude to a coming shift in market dynamics. For instance, trucking orders recently increased as a result of pent-up working capital across trucking companies. And as explained by Zach Strickland of FreightWaves, that’s the natural progression of all truckers. Everyone wants to be an owner-operator, but the real value lies in becoming more strategic. Even in the best of times, the next lull is around the corner. And the only way to maintain profitability is to understand the industry’s state and do something about it. That’s where seeing the signals, such as Freight KPIs, within individual lanes, looking at both granular and holistic views, can add the most value.
It all goes back to creating a more strategic approach to viewing available loads, moving owner-operator assets, and knowing when accepting offered freight from a shipper is the right thing to do. And the crux of the whole process rests on the timeliness and validity of any data-driven insights available. That’s where a resource like FreightWaves SONAR can help, providing insight into all industry conditions, identifying the correlations within freight data and avoiding unnecessary losses through logistics automation where possible.
Brexit and Politics Embroil the Mix
Few activities are more complex than global supply chains. And Brexit plays a role as well. According to Bloomberg, “‘Driver shortages over the holiday season are normal and usually lift spot rates,’ said Stephan Sieber, chief executive officer of Transporeon. But ‘the magnitude of the deviations we saw at the back end of 2020 was not normal.’” While it can seem far-fetched to imagine impacts on the U.S. trucking industry from Brexit, it’s crucial to think about what it means. Any change in international trade will inevitably result in implications in the U.S. trucking market. The U.S. freight market sets the global standard, but the standard can have a reverse flow every once in a while.
In other words, changes within Britain, which has remained a primary consumer of U.S. exports, will trickle down into U.S. changes. Additional effects may derive from differences in how other countries position their supplies and capacity to lower operations costs. Even ocean liners from China to the U.S. West Coast could see an effect if the market swings violently overseas. Britain barely avoided a calamity by passing an 11th-hour trade agreement, but even still, the need to be ready for a future change in global trade law is absolute.
The topic of trade laws doesn’t end solely with Brexit. It continues. Market fluctuations have always been subject to political change and vice versa. Political instability in the U.S. could result in entirely new legislation to benefit (or harm) the trucking market. Other changes could result in environmental consequences. Regardless of party or affiliation, trucking companies need to play the long game. They must be mindful of how any change could result in adverse effects when politics flip. And that’s a useful insight to have, especially as companies look toward higher demand and tighter capacity through much of the first quarter of 2021.
The Next Stimulus Will Play a Role Too
Another factor affecting the state of the industry is the next coronavirus relief bill. As the new Congress convenes and takes up the many issues on the table, a new stimulus could bring new life and spending money to the industry. Why? Well, political insiders have hinted at a massive rollout of the COVID-19 vaccine in the early days of the Biden administration. And even last week, Craig Fuller, CEO of FreightWaves, noted how Biden “should appoint a final mile logistics coordinator whose sole job will be to handle the last mile of vaccine distribution.” With that in mind, reefer rates could become another factor that’s usually not that problematic during the coldest months of the year. And again, it will play on the need to find and accept loads based on profitability and attractiveness, using predictive and prescriptive analytics to see the best moves.
Navigate Trucking Market Uncertainty with Actionable Freight Data
The best-laid plans are always changing—always moving to reflect the latest trends in the industry. In freight management, freight forecasting of the trucking market is the best way to isolate the risks and find a better, more profitable future. And that’s even more important in an industry where minor disruptions can have a lasting impact. In part two of this series, we will dig deeper into how a COVID-19 vaccine distribution presents new challenges, what to expect of the unprecedented demand of eCommerce, and when the world will finally enjoy some return of normalcy. That will also be integral in all decision-making when it comes to dining, taking advantage of available services like luxury travel, and becoming more comfortable in and outside our homes.
How to Thrive in Volatility with Operational Excellence and Profitability
Disruption is the new normal of supply chain management. Everyone knows disruption is coming, and many try to plan carrier freight pricing based on the impacts of disruption. Unfortunately, those plans often fall short of meaningful improvements and fail to consider the big picture. Yet, truck industry analyses and insight into existing conditions can help safeguard against uncertainty. Earlier, we explored the political side of things. But now, let’s take a closer look at how a vaccine distribution will play into final mile delivery, why and how eCommerce will still change the narrative, and what to expect from pent-up customer demand.
COVID-19 Vaccine Distribution Impacts the Final Mile and Pressures Carriers to Act
The distribution of COVID-19 vaccine has been a focal point of media coverage in recent weeks. And while the vaccine does represent a major undertaking, it doesn’t necessarily amount to massive truckload changes on a national scale. With Pfizer and other manufacturers focused on getting vaccine doses out through the big three carriers, there’s simply not a lasting need to worry at present.
But that comes with a significant caveat. The changes highlighted in part one of this series emphasize the uncertainty relating to political change. As the Biden administration begins to build out the final mile distribution of the vaccine, it could result in fewer available drivers and even the diversion of other resources. Therefore, the pressures placed on last mile delivery may have a compounding effect, forcing truck industry participants to grapple with inefficiencies and grow more strategic. And it comes down to seeing the full shipment lifecycle from its past, descriptive state, through its likely costs in the future.
The Unprecedented Demands of E-Commerce Continue to Accelerate
E-commerce has enjoyed years of sustained growth, but 2020 was a game-changer. It accelerated eCommerce expansion, unlike anything in history. Unfortunately, the demand for more eCommerce coincides with an expectation for fast, free shipping. According to Shopify, “free shipping is just the tip of the iceberg: 39 percent of U.S. shoppers expect two-day shipping to be free, while the same-day shipping market in the U.S. is forecast to top $9.6 billion in 2022.” The problem derives from the fact that fast, free shipping incurs a cost, even a cost to the environment. And as such, the urgency remains. For carriers to stay strategic, they must recognize that demand is growing and apply trucking data to plan accordingly.
Yes, those are processes standard among any transportation service provider. However, it does represent a need to have more accurate and timely data when making any decision. Part of that data includes invaluable indices, such as the Outbound Tender Reject Index (OTRI) in FreightWaves SONAR.
Pent-Up Demand for Services and Travel Will Add New Pressures to the Industry
Another factor affecting the truck industry goes back to the “cabin fever” that arose through the lockdown and recent months. The uncertainty following the COVID-19 vaccine roll-out and increased demands on eCommerce have a breaking point. People want out of their homes and the opportunity to enjoy life once again. That includes taking advantage of more in-person dining services, traveling to new locations and reconnecting with family in-person. Those may not seem like significant factors, but each carries a demand for more throughput in the food supply chain. It amounts to an increased demand for fuel, which could cause a net effect of higher rack prices for truckers.
Still, the demands do not end there. They continue through more appointments with beauticians and hair stylists, more lavish spending in renovations, and well beyond the idea of simple dining and travel. Think about it. Savings accounts have reached an all-time high, and that money needs to go somewhere. In part one of this series, that mention evoked a marked tick upward in truck orders. But it will also amount to an increased strain on the industry. After all, capacity remains finite without ample drivers and equipment. There’s much to be discerned, and it’s essential for truck industry participants to gauge the market conditions and respond accordingly.
Surcharges and Rate Fluctuations Remain a Threat to the Industry for the Foreseeable Future
Responsiveness to truck industry conditions does not end with merely knowing what’s happening right now; it includes recognizing future fluctuations. SONAR carries that capability in predictive modeling across rates, various indices and more. Combining that data with the probable trends among all carriers to levy surcharges after the seasonal peak ends leaves a lasting threat. If the pandemic continues unchecked and pressures remain at current levels, surcharges will not simply vanish. Instead, major carriers will extend COVID-related measures or even implement additional rate increases.
The truck industry remains subject to various influences that extend beyond retail supply chains. And throughout the first quarter of 2021, the surcharges and uncertainty will be highest. But stability should begin to return during the second half of the year. Unfortunately, the writing is on the wall for that time as well. The past year taught consumers that they could do much more online than previously thought. And while the gig economy tries to keep pace, the demand is on for truck industry participants and carriers to make the best decisions and keep the shelves, whether digital or virtual, stocked. Beyond carriers optimizing their operations in 2021 to remain profitable, shippers are turning to technology, primarily analytics platforms, to keep up. Let’s explore what shippers need to think about.
Enterprise Shippers’ Logistics Strategies to Know
Surviving the tumultuous year of 2020 represented the most critical challenge shipping leaders had to face in years. Adjusting current logistics strategies demonstrated the second great challenge of the pandemic. As 2021 begins, new growth and adjustments need freight managers’ attention to start the recovery process. Embracing new and improved logistics strategies remains the best way to adapt to clients’ changing demands in 2021 and beyond. And it’s essential to know a few things about enterprise shippers’ top logistics tactics.
1. Enterprise Shippers are Looking for Ways to Capture and Analyze More Data
Making the most of available technology has always been critical for fine-tuning a supply chain. Now more than ever, shippers need to find innovative ways to make the most of real-time freight data and analysis. Today, logistics strategies rely on accurate and up-to-date data for everything from capacity planning to invoicing. Data will ensure smooth operations and successful executions at every point along the supply chain. Capturing, analyzing and applying data will help improve load capacity, boost delivery success rates, increase profit margins and enhance shipping insights.
2. Logistics Strategies Will Leverage Expert Insight
The best enterprise shippers look for ways to improve trucking costs and operations with big data applications. This can represent a challenge for some managers to handle alone. A need for a genuinely independent partner becomes clear when one takes a step back from daily operations. When managers try to look objectively at their supply chain network, the need for an outside perspective remains clear. The best logistics strategies depend on expert insight, such as the data and analysis found in FreightWaves Passport, which focuses on the chain’s inner workings. Unbiased insight and suggestions highlight what third-party strategists provide to freight and logistic managers.
3. Strategic Value Lies Within Access to Actionable Data
Understanding the platform’s value and the data collected is vital for growth and shipping lane management. Additionally, awareness of how to implement predictive analytics and planning for the possible outcomes gives managers the upper hand. Actionable data use boosts freight transport processes and allows for more effective strategic planning. Strong and versatile logistics strategies depend on this data.
4. Logisticians Will Want Vast and Granular Views to Make the Best Decisions Possible
Making fair use of logistics strategies often comes down to where the focus is within a supply chain network. Some key things to keep in mind when it comes to decision-making include:
- Short-term goals need updating often to avoid stagnation.
- Long-term goals should also be tweaked and adjusted as needed.
- Sometimes data analysis needs to be refocused and fine-tuned.
- At other times data analysis should remain broad and long-range in scope.
- Adaptability and flexibility will remain essential for growth.
- Real-time freight data, communications and decision-making become essential.
- Developing and maintaining robust protocols takes careful planning, but they will always pay dividends in the end.
5. The Remainder of 2021 Will Be Subject to Continuous Spot Versus Contract Balancing
2020 showed the industry that adaptability remains critical during times of disruption. This same flexibility will remain essential in 2021 and for the foreseeable future. One significant influence on the industry last year was the balance between contract shipping and spot capacity integration. Though the road to recovery has begun, the new normal may be forever different than just a few short years ago. Freight managers and fleet operators will need to continue utilizing all capacity options. To secure loads and keep their trucks running full, compromises will remain essential within logistics strategies.
6. Full Digitalization Continues to Be a Goal for All Enterprises
Planning gets complicated at times, and letting go of past methods and processes will become even more challenging. But it represents a needed feature for continued survival. Automation and digitalization must remain the goal of freight managers and logistics personnel now and in the years ahead. According to California Manufacturing Technology Consulting, “A successfully implemented logistics strategy is important for companies that are dedicated to keeping service levels at the highest levels possible despite changes that occur in the supply chain. Remember, the goal of any logistics strategy is to deliver your customers the right product, at the right quality, at the right price, at the right time, in the right place – while spending as little money as possible.” Making the most of the tools and automation available will help managers maximize profits, reduce waste and secure more loads.
Align Your Enterprise to These Trends to Achieve the Most Substantial Growth Through 2021
Logistics strategies of today are continuously changing to enable collaboration among shippers, carriers and brokers. And as technology advances, forward-looking strategies will deploy automation and digitalization to maximize value and opportunities to conserve resources. Ensure your enterprise is ready for the future expansion of technology by embracing these strategies and putting the power of freight data and forecasting to work.
BIO: Adam Robinson is a data-driven storytelling marketer who has fallen in love with the quest to make supply chains as high functioning, collaborative, waste-free, and productive as possible in an altruistic endeavor to maximize human capital. Adam works at the intersection of sales, marketing, and product, giving him a unique opportunity to build a community around a platform at FreightWaves that meets his passion & personal mission of hyper-efficiency.