With most Americans sheltering at home under government stay-at-home orders, the COVID-19 pandemic has flipped the switch on the domestic freight market.Tweet
Responding to Abrupt Market Disruptions With Digital Freight Technology
The freight frenzy came on fast but seems to have left even quicker. US Freight volumes have plunged to the lowest rate since Freightwaves began recording them in 2018.
Capacity continues to loosen with most of the country on lockdown and with industries not fully functioning there isn’t enough freight to keep capacity tight.
Logistics and supply chain companies remain the backbone of the U.S. economy and the American way of life.
So, how do supply chains continue to function smoothly and consistently during such an unprecedented and unplanned for global crisis?
What’s Happening In The Domestic Freight Market?
Over the past year, the outbound tender index had been remarkably low, putting pressure on carriers and brokers throughout the market because the majority of freight was moving through primary award carriers.
The market saw low rates of rejection by carriers as they were grabbing all their contracted or fixed opportunities, leaving little spot or overflow freight available for carriers and brokers.
What is the Current Status of the US Freight Market?
Market conditions quickly shifted in late February and March due to the COVID-19 pandemic. We initially saw levels that exceeded 2018 in early March, but now things are starting to return to pre-crisis levels.
It’s not just the extreme levels that we saw, but the rate of change that was extraordinary. It wasn’t a steady gradual adjustment with capacity decreasing week over week or month over month with rejection rates increasing, leaving more spot freight on the market. It was as though, almost overnight there was an explosion of spot freight coming into the market that needed to be covered.
It’s important to note that what we are all seeing behind these numbers is not just business as usual. Seasonality trends and all normal expectations were pushed aside as the highest levels in months appeared out of nowhere.
Moving freight is always a critical function in the US economy, but the unprecedented level of urgency, the critical nature of the goods being moved and the need to get them to their destination quickly given the current crisis situation.
What does the COVID-19 data say?
- Volume fell 30% off this year’s peak on Mar 23.
- Supply is strong.
The Outbound Tender Rejection Index sits at 5.06%, off a high of 20.2%. When the spot market cools, carriers return to more profitable or consistent contracted business. That means carriers reject fewer contracted tenders = lower OBTRI.
- Rates on Long Haul runs have tumbled while short-haul rates remain stable.
How Can Transportation Management Systems (TMS) Keep Supply Chains moving during COVID-19?
Shipping companies should be turning to technology to help weather the storm and come out on the other side of COVID-19 set up for success. Technology allows shippers to collaborate with supply chain stakeholders while they are working remotely and makes connecting with additional truck capacity easier and more efficient.
NOW is the time for shippers to lean more heavily on technology.
3 Ways your TMS can help combat market volatility?
At Loadsmart we believe that leveraging technology and thinking about your TMS from a broader perspective gives shippers an advantage when faced with market volatility.
1. Accelerate Rate Discovery with Instant Rates
For shippers, especially those with a large volume to cover, the challenge of getting a price, that’s not a paper rate, that you have confidence in, and that’s truly indicative of the actual capacity that’s also bookable is tough.
Many companies that were using more efficient solutions to cover their spot freight prior to the COVID-19 crisis are reverting back to older solutions to keep their heads above water.
The need to get rates, capture data coupled with the complexity and confusion in the market has caused them to go back to swapping spreadsheets over email with lists of carriers and brokers.
Getting rates, understanding what genuinely bookable truly liquid rates are out there is generally a challenge, especially for companies that haven’t invested in integrations with more machine learning-driven instant pricing solutions.
Still, in the current market, it’s even more difficult. Just capturing the eyeballs of a carrier or broker to make sure they get you a rate is a challenge and knowing if the rate is going to be good and how long it’s valid is difficult. We believe that ultimately this is not a challenge shippers should be facing.
We recognize that in a market like the current one, there are going to be multiple problems to solve and considerable challenges to overcome. Yet, we don’t think that getting a bookable rate should be one of them.
It really should be much more straightforward. Much more scalable. And much more automated.
So those having to make procurement decisions can spend their time and their energy on more critical challenges than just trying to figure out what rates are available.
Artificial intelligence is fundamentally changing how freight is priced and shipped.
The thought that someone on a sales team receives a rate request then has to connect with operations and others within a brokerage or carrier, trying to understand what availability is out there is exhausting. Then they still have to decide how much to mark it up and how much they can squeeze out of the customer, then after some time which can be hours someone gets back to the shipper with an instantly bookable rate – those days are behind us.
Pricing calculations need to use the power of artificial intelligence and machine learning models.
AI-powered pricing provides shippers with many more rate options while reducing the headcount cost associated with calculating rates.
Having a sales team, whose compensation is almost entirely driven by how much they can squeeze out of a customer and how much they can mark up to the shipper focused on calculating rates is not necessary.
Now you can have algorithms calculate the rate, and you don’t have to pay them a commission.
The market then becomes more efficient, which allows us to offer more value to Loadsmart customers rather than price gouging, which has been typical with spot in the past.
Using a machine learning model allows us to provide our customers with an instantly bookable rate in a matter of seconds, by ingesting large amounts of data (over 500 different data points) allowing us to provide a rate within 2 to 3 seconds in any one of over 900,000 lanes across the United States.
2. Make Your Routing Guide Respond to Market Conditions
Let’s dig a bit deeper into the idea of the routing guide and how integrating your routing guide with a solution like Loadsmart makes your routing guide better and smarter.
Those that didn’t see much volume running through your routing guide last year have certainly seen the dust blown off that routing guide recently.
What Is The Problem With Traditional Freight Routing Guides?
Traditional routing guides are static. Routing guide rates only get updated a few times a year, and loads can spend hours or days in routing. Rates are often significantly higher than the spot market.
Why Are Dynamic Freight Routing Guides Important?
With Loadsmart’s dynamic routing guide, rates update in real-time and we accept 100% of tenders instantly. You can take advantage when market rates are below routing guide rates.
Integrating with Loadsmart’s dynamic routing guide allows you to reduce the amount of freight that goes to the spot market, you can get routing guide freight covered much faster, and pay less to move freight than you would by relying on only static rates.
3. Find the Best Carrier, Faster with Algorithmic Sourcing
Algorithmic sourcing is the best way to get a carrier to cover a load. Getting the right pricing, knowing the rate you are paying is reasonable and that the tender gets accepted by the carrier broker is critical. But it’s also imperative to understand that when you are working with a broker like Loadsmart, how they go about choosing the carrier who ultimately ends up moving your freight.
Algorithmic Sourcing – The Old Paradigm vs. The New Normal
Traditionally the only way for a broker to get a load covered was to have an army of carrier salespeople pounding away at keyboards and dialing the phone all day, communicating with carriers trying to get freight covered.
We understand and respect the value that comes with a carrier sales team and have our own carrier sales team at Loadsmart. That said, we also realize that over the long term, much more freight needs to be covered based on algorithmic decision making rather than by individuals to allow carrier sales to focus on the relationships they have with carriers.
Making sure carriers meet service levels and are performing as they need to is a better use of carrier sales time versus worrying and touching every single load.
Algorithmic sourcing allows you to move the load through the system without the support of a carrier salesperson (unless in the case of an exception), giving your team time to build better relationships with carriers and while increasing operational efficiencies.
How does Loadsmart Use Algorithmic Sourcing?
There are 3.83 Million Class 8 Trucks on the road in the United States.
For shippers that were recently struggling to get their freight covered, that may seem like not enough, but the reality is there is a tremendous amount of capacity out there in total. That’s important to note because it speaks to the complexity and the challenges associated with choosing a specific truck to move a particular load.
Considering the complexity of a problem where you measure in millions, not single digits or tens of thousands, it’s hard not to think that there really has to be a better solution out there.
One would imagine there has to be an algorithm out there that is capable of finding way more options than a person possibly could.
Who has the time it would take to consider millions of options before making a decision? Not logistics professionals who need to ship a lot of items very quickly while keeping costs down for both themselves and their customers.
How Does Loadsmart Help Shippers Consider Millions Of Freight Options?
Loadsmart helps shippers consider millions of freight options by using technology as much as possible. We start by determining which carriers we feel should be part of our network.
We use technology to make better carrier network decisions by integrating with all sorts of 3rd party data sources, including RMIS, FMCSA, which gives us access to inspection data and carrier safety records and even integrations with load boards.
Load board integrations are essential to us, not because we are trying to move freight on the load board, but because it allows us to monitor carrier behavior on the load board.
Here’s an example of why load board monitoring is essential.
By integrating with load boards, Loadsmart’s able to see how many trucks on average a given carrier has posted on that load board. That’s important because we also know how many trucks they have in their fleet. We get that number directly from the carriers we currently work with and easily capture the number from other sources when it’s not.
Let’s say we know a carrier has ten trucks in their fleet. I can see that on one or two major load boards they are consistently posting 50, 60, 100 trucks. What data has historically told us is that it’s probably a carrier you don’t want to work with because they are representing that they have much more capacity than they do.
They may be out there fishing for loads for trucks even though they already accepted a tender putting them at high risk for being the type of carrier that will drop a load just before pickup because they got a better offer. That is not the type of carrier Loadsmart wants to move our customers’ freight.
Making sure the carriers that you have in your network are carriers you want to be doing business with is just one of many examples of the things Loadsmart can do with the massive amounts of data we ingest from 3rd party sources. It allows us to solve particular problems for our customers.
Bonus: Keeping Your Loading Docks Open And Fully Utilized
Loadsmart can help improve the throughput of your loading docks to ensure your facilities, which may already be under pressure under current market conditions, are running as efficiently as possible.
While this is the way everyone books appointments, we believe there is a better solution that improves the throughput of facilities while also reducing driver wait time.
In any market condition, the quality of driver experience is super important, but especially in times like now, when every minute and every hour of driver time and facility availability is vital. We want to make sure that both the driver over time and the facility capacity are being used in the most efficient way possible, not wasting anyone’s time and not wasting available dock hours.
So, how do we make that happen?
We accomplish this by integrating with the facility to capture real-time dock availability through an API allowing us to book an appointment when booking the load automatically.
That allows us to book an appointment automatically when booking the load. Instead of having to call or email the facility, we can grab an appointment instantly and automatically by integrating with the doc scheduling tool that you are using.
Integrating via API allows us to grab the appointment availability and lock in the appointment much quicker while also taking advantage of the tracking data we capture. At Loadsmart, we are obsessed with tracking and put the data to work by using the real-time ETA of when the truck is going to arrive at the facility to see if we need to update the appointment, which we do automatically while the drive is still en route.
By doing this, we are able to avoid situations where drivers arrive at times outside their scheduled appointment time. For example, a driver’s expected to arrive at noon, but we know thanks to real-time ETA data that the driver is going to get there at 8 AM.
Rather than having the driver sit there and wait for four hours, we can automatically ping that facility via the integration with the dock scheduling tool to see if there is an earlier appointment available. Then if there is an appointment that is closer to the driver’s real-time ETA, we can grab that and give back our previously scheduled time.
Why does this matter?
The person at the gate doesn’t have to worry about trucks showing up early or late, and drivers don’t have to sit there and wait for their initially scheduled appointment if they are too early or to get worked in if they are late.
Instead, we more closely align their ETA of their truck with an appointment much closer to their arrival time. Meaning you have fewer drivers waiting at the gate and less driver time wasted waiting at a facility in general. You can improve the throughput of the facility because you have a better match with when the truck arrives and when there is an available gate to get that truck loaded or unloaded and move on to the next truck.
In times like we are experiencing now, driver time and facility efficiency are critical. But in any market conditions, we all need to show more respect for drivers’ time and the driver experience.
Automating and integrating with the dock scheduling tool allows us to reduce driver wait time and be much smarter about real-time appointments, which improves your network.
How Can Shippers Prepare For The Next Supply Chain Disruption?
Shippers can and should prepare for the next supply chain disruptions by implementing digital freight technologies NOW, not when the next disruption happens.
The last few months have shown shippers that volume can surge, and outbound tender rejections can rise to unprecedented levels at the drop of a hat.
While outbound tender rejections begin to fall, providing stability for shippers now is necessary to ensure the next disruption doesn’t catch you off-guard. Integrating with digital freight technologies now will give you peace of mind and make managing the next crisis easier.
As uncertainty grows, shippers are turning to technology for greater clarity to leverage instant market-based pricing and dynamic routing to deliver real savings while improving service.
Don’t wait for the next disruption to happen. Integrate your TMS with Loadsmart now to help you build, manage, and tender loads.