While the challenges facing the trucking industry may vary from year to year, the one consistency is that companies managing private and/or dedicated transportation fleets are being forced to do more with less. Following the ever-increasing need to improve efficiencies, the digitization of the supply chain proved to have a substantial impact on the efficiency and flow of freight operations in 2018.
As we review our predictions from last year, it’s safe to say most of them held true. Data sharing and open access, the onset of APIs, instant pricing + booking, and technologies such as machine learning have made all the difference in getting the most out of finite transportation resources.
For 2019 we expect even more pervasive digitization than last year, ultimately driving towards a more unified experience for shippers and carriers alike.
On May 15, 2018, we wrote about the first fully automated intelligent routing guide with dynamic rates in the US. That powerful tool enables shippers to automatically book a truck before the shipment turns into a spot load and has reduced spot volume for Fortune500 Shippers by as much as 50 percent. Loadsmart accepts 100 percent of tenders received from the dynamic routing guide, guaranteeing capacity. This feature helps shippers avoid the same-day/next-day markets, which are known for steep prices and service failures. Given the huge interest and questions we got from the logistics community, we decided to expand and explain the reasoning behind it and how it actually works in a granular way.
Technology is transforming the automotive and logistics industries. But for many supply chain managers the biggest headaches are still the most familiar ones, such as driver and transport capacity shortages, lost containers, poor forecasting and incomplete visibility. Just this morning, The Wall Street Journal featured how Deere & Co. is raising equipment prices to make up for rising freight transport costs. The equipment maker is a host of U.S. manufacturers reporting rising expenses as a growing U.S. economy drives up prices for materials and shipping.
According to the study, 79 percent of companies with high-performing supply chainsachieve above average revenue growth. Yet, very few companies include supply chain managers in their boardrooms. Businesses that have applied big data analytics to their supply chain functions have seen a reduction in costs, improved risk management, shorter cycle times, more accurate forecasting, and an overall improvement when it comes to making informed decisions.
Loadsmart’s co-founder and CEO Ricardo Salgado recently joined a group of industry experts to discuss the evolving landscape for logistic service providers with the editors at SupplyChainBrain.
View excerpts from their conversation below or watch the talk in its entirety here.
The role of the freight broker is evolving and will continue to evolve. It’s about adopting technology and using it to make [services] much more powerful and easier [to access]. Consumers are requesting better pricing and more visibility. In order to do that, we need that underlying technology.
When you’re asking a shipper to trust you with its $75,000 worth of cargo, and it’s going to cost you $1,300 to get on your platform, that’s a different sell than an Uber giving you a $25 promo code to try its [service]. The adoption curve is a bit different. But you’re seeing also a generational shift. This is the first year that we’ll have more Millennials than Baby Boomers. You’re starting to see people who are more comfortable in sharing their car, or their information online. They’re more comfortable with the underlying technology and taking a more of a calculated risk.
Things are changing a lot in the trucking industry. Technology startups have flocked to tackle big and small problems in the supply chain. Venture capital funds are backing different solutions excited about the size of the market and historical inefficiencies. Meanwhile, traditional players are pledging hundreds of millions of dollars to improve existing processes to avoid being dethroned.
Surprisingly, very little has changed in the actual movement of freight, at least in outward appearance. There are a number of reasons for this, but chief among them is the industry’s complexity, which together with historical distrust of technology has lengthened the adoption cycle of new features among more traditional players. And where technology has in fact been adopted, it’s impact has been undercut by the sheer size and fragmentation of the industry; technology is only materially felt once a substantial number of players adopts it.
But timid technology penetration and slow adoption should not discredit or downplay the impact that technology and automation will have, playing a fundamental role in shaping the future of the trucking and freight brokerage industry. And what’s coming is really exciting.
There is a clear downturn tendency in freight brokerage margins. As they continue to shrink, the historical value proposition of freight brokers—selling and pricing each load and finding its truck—will decline heavily. Soon, brokers won’t need thousands of employees to power their operations; instead, new technologies like machine learning and artificial intelligence, ubiquitous data sharing, more secure and available chain of ownership (ie via blockchain technology) and real-time, over-the-air telematics will serve as potent force multipliers. All of this will dramatically reduce the actual cost of brokering freight and increase consolidation of small- and medium-sized brokers.
In the long run, things will change more dramatically. Several states will clear autonomous trucks for specific lanes (hub-to-hub). Carrier operational costs will drop significantly and drivers may move from carrier-based to warehouse-based. Huge consolidation on the carrier side will probably follow. Small companies will likely struggle to compete in this new environment, displaced, swallowed up, or put out of business by large enterprises with massive fleets of autonomous vehicles, where few carriers will be moving a very large portion of the total FTL shipments. The exact role original equipment manufacturers (OEMs) will play in creating this new trucking reality is, for the moment, less clear, but it will likely be important as they too want to become software and service providers. Some big enterprises shippers will end up running their own autonomous trucks fleet, but most companies will rely on third party autonomous truck providers.
Of course, down the road, brokers as we currently know them will all but disappear, crippled by the continued advance of technology and growing use of automation across the industry, which only debase a broker’s value as they become more popular, lowering or removing thresholds that were once gatekeepers. Once this happens, the age of logistics technology platforms will truly begin.
Loadsmart is positioning itself for this upcoming future: a future based on data, artificial intelligence, and automation of load movements. We have nurtured good relationships with logistics players across Asia, Europe, Latin and North America, and are sharing knowledge with these trusted partners to transform the logistics business.
Felipe Capella is co-founder and Chief of Product at Loadsmart
We’ve talked about how logistics technology can save the industry, but did you know it could help save the environment, too? As a highly fragmented industry that’s severely lacking in technology, many trucks are running with little efficiency. If the trucking industry could eliminate its deadhead miles, trucks would spend less time on the roads, using less fuel and cutting down on emissions.
The Facts of the Matter: Deadhead Miles and the Trucking Industry
In a 700 billion dollar industry that moves 70% of all goods in the United States, there is little room for inefficiency. Class 8 trucks log over 130 billion miles a year, with nearly 20 billion of those considered deadhead miles. The trucking industry accounts for 12.8% of all fuel purchased in the U.S., which translates to 17.5 billion gallons in 2014 alone. By eliminating deadhead miles, the industry would save over 2.5 billion gallons of fuel every year. A decrease in fuel use and emissions will in turn reduce air, water and land pollution, acid rain and ozone destruction.
Real-Time Shipment Tracking and Notifications Eliminate Deadhead Miles
Real-time shipment tracking sounds pretty “Big Brother,” right? Well it’s not, in fact, real-time shipment tracking is one of the most powerful tools available to the industry, for shippers, carriers and the environment. Using GPS technology, logistics platforms are able to send carriers local jobs instantly, eliminating time usually spent at loadboards. When carriers are able to find loads via location instead of traveling back with an empty trailer, shippers receive better rates, drivers don’t have to waste time, extra trips are eliminated and the entire process is streamlined.
Fleet Management Makes For Better Business Decisions
Knowledge is power. It’s an age-old adage for a reason. When dispatchers and owners know exactly what’s going on with their drivers, via tracking, open communication platforms, instant e-document transfers and load organization tools, they are able to make better and more informed business decisions.
So What Does Logistics Technology Mean For the Environment?
With a growing number people in the industry transitioning to technology based platforms, the overall efficiency of the industry is poised to skyrocket in the coming years.Our goal is to bring the excess capacity to market and eliminate the billions of deadhead miles traveled every year. With an increase in efficiency, there will be a decrease in traffic, emission, safety and economic concerns.
There are dozens of impending changes in the trucking industry. With new legislation passing monthly, upgrades in technology happening weekly and concerns being addressed daily, it seems that the only constant in this industry is change. So what are some of the biggest things on the horizon?
This is by no means a new problem, but it is a problem that’s creating huge changes in the trucking industry. With an estimated 890,000 drivers needed in the next decade and high turnover rates across the board, the industry is struggling to find a solution. When paired with the fact that freight volume is forecasted to increase 29% in the next 11 years, these statistics get downright scary. People are calling for collaboration among fleets, offering more benefits to drivers, mass recruiting and even working on passing legislation that allows drivers as young as 18 to carry freight across state lines. While there may not be any one solution, the one thing we do know is that change is coming.
Long-Term Highway Bill
The Surface Transportation Reauthorization and Reform Act of 2015 (STRRA). Have you heard of it? Maybe you don’t know it by title, but you have definitely heard about how it’s causing changes in the trucking industry. The most noted reform in this bill is a measure that allows states to create “compacts” that lower the minimum age to cross state lines from 21 to either 18 or 19 (depending on the version) to help alleviate driver shortages. While the Internet is abuzz with the potential minimum age reduction, the STRRA is first and foremost a 6-year plan to spend $325 billion on improving national infrastructure, and hopefully combatting congestion problems. At the same time, this bill has language that would allow for the nationwide operation of twin 33-foot trailers and for states to be able to change the maximum weight limit to 91,000 pounds, both of which have raised safety concerns with the Trucking Safety Coalition.
As technology revolutionizes the trucking industry, many look to autonomous trucks to combat the impending driver shortages. Will these self-driving trucks soon cause major changes in the trucking industry? Sort of. Most “autonomous trucks” are actually only level 3 autonomous, meaning that drivers can cede safety-critical functions under certain conditions, but are able to take back full control at anytime. While companies such as Freightliner say they have no intention of creating a level 4, fully autonomous truck, research from Frost & Sullivan predicts that as many as 182,000 level 3 trucks could be on the roads by 2035. The report goes on to say that the factors that affect the popularity of autonomous trucks include cost, social acceptance, legislation and the maturity of the technology.
This problem is the offspring of driver shortages and the recovering economy. On one hand, fleet owners have been seeing an increase in demand over the past couple of years that have many companies operating around 95% capacity. While this seems like a great change in pace for the industry, the reality is that it limits growth. For the companies that are operating at a high-capacity, the ongoing driver shortages and the inevitable worsening the shortage discourage fleet growth. The Wall Street Journal reports that others, such as Aaron Tennant, president of an Illinois-based company, Tennant Truck Lines Inc., have percentages of their fleet sitting vacant, costing tens of thousands of dollars a month.
The trucking industry accounts for over $700 billion in revenue every year in the United States alone. Over 80% of all goods that are consumed every day by Americans are transported by trucks. While truckers and the trucking industry are under constant scrutiny, the fact is that without freight the country would stop. With the impending trucker shortage, there has been an increase in speculation on the country’s dependence on trucks. But what exactly would happen if one day the trucking industry collapsed?
Food: Thank the Trucking Industry for Eating
In the event of a trucking industry collapse, food supplies would be affected almost immediately. While larger stores would see the most immediate impact from a depletion of perishable goods, smaller stores would run out of all supply very quickly. The American Trucking Association (ATA) estimates that significant shortages would occur in as little as three days and that the shortages would be expedited by consumer panic.
Healthcare: Trucks Bring Medical Supplies
Perhaps the most disastrous impact would be on the healthcare industry. Many hospitals and care providers only order supplies, such as syringes and bandages, on an as-needed basis, so in the event of a trucking industry collapse, critical supplies would be depleted in a matter of hours. Equally as catastrophic, pharmacies would soon run out of life-saving medications.
Way of Life
The little things that we take for granted would soon be considered long-gone luxuries if the trucks disappeared. There would be no one to deliver fuel to gas stations, and automobile transportation would become impossible within a week. With no means for transportation, people would be unable to access work, run errands or attend school. At the same time, garbage would start to pile on the sides of streets and would quickly reach an overwhelming level, especially in heavily populated areas. While gross, more concerning is the fact that this would provide an ideal breeding ground for disease. Even banks would suffer, as they run out of cash and are unable to process transactions.
The Takeaway: The Trucking Industry is America’s Backbone
It’s important to be reminded every now and then of how crucial the trucking industry is. Although a trucking collapse overnight is highly unlikely, the industry faces incremental problems like driver shortages and limited capacity. To avoid disruption we need to make the entire process more efficient. And to treat truck drivers as important as they are: the backbone of American logistics.
In a world where technology permeates nearly every major industry, the trucking industry is no different. With a steady rise in the number of truck drivers who use smartphones for both entertainment and job management, companies are racing to provide the technology they need to revolutionize the trade. The trucking industry accounts for over $700 billion in yearly revenue and employs nearly 9 million people in the United States alone, so it’s only natural that there is hesitation in transitioning such a massive industry into technology. While logistics technology makes everything easier, there will always be a need for the human touch in the trucking industry.
Shipments Get Rerouted, Trucks Break Down
Life happens, daily. And in life, sometimes things go wrong. Pallets can be rejected by the receiver and put back on the trailer. Appointment times that are missed will need rescheduling. Trucks can break down on the road. Warehouses can be closed when a driver arrives. The list goes on and on. There are hold-ups and obstacles that can’t be solved without a human on the other end. While it’s easy to imagine that using an app to manage your fleet results in a disconnect between dispatchers and drivers, in reality the right platform can make communication easier than ever. Loadsmart, for instance, provides a chat platform for dispatchers, drivers, shippers and warehouse operators to keep one another updated.
Your Livelihood is at Stake
In an industry that transports more than 70 percent of all freight, there is always a lot at stake. It’s crucial that every detail is perfect. While logistics technology provides tools such as real-time GPS tracking and instant booking of shipments to streamline the process, such a complex industry cannot be reduced to just a few computer clicks. So although Loadsmart automatically vets its carriers with high FMCSA safety and performance standards there is always a human touch on the other end making sure that all of the details fall into place, assuring you that your goods are being transported by qualified carriers.
When it comes to your money, sometimes it’s hard to trust that a software can instantly give you the best shipping price. Though our advanced algorithms are constantly crunching data to deliver a fast and accurate estimate, there is always a professional double-checking to make sure we deliver fair prices to both our shippers and partner carriers.