The Future of Motor Freight

This is the year that turned many industry sectors upside down, and it’s clear that freight management did not escape that fate. Already grappling with truck driver shortages, rising freight rates, and intermittent capacity issues, the domestic transportation sector experienced major shifts when the global pandemic disrupted supply chains around the world—and shippers were sent scrambling for solutions.

With his finger on the freight marketplace’s pulse, Bart De Muynck, vice president of research at Gartner, says that he’s currently seeing an increase in demand for domestic freight, more loads being rejected by carriers, and higher spot market rates.

Outbound tender rates are “really high” right now, according to De Muynck, while tender rejection rates are hovering at about 26%—not far off the high rates of 30% that prevailed in 2018. “We’re in a very tight market right now.”

Rates are also presenting challenges for shippers that are trying to do more with less in an uncertain economy. “We’re closing in on three dollars a mile right now compared to May, when that was less than two dollars,” says De Muynck. These increases are due not only to higher demand for trucking capacity, but also because the carriers themselves are dealing with higher costs of doing business.

“We’re seeing hours-of-service changes, insurance costs going up, incidences going up, and the size of the related verdicts also increasing,” De Muynck points out. “Carriers are going bankrupt for a variety of different reasons, all while everyone is obviously also feeling the impact of the pandemic.”

Making the shift

As shippers come up with new ways to manage these and other roadblocks, companies like Amazon continue to raise the bar for customer expectations in both the B2C and B2B landscapes. With their e-commerce sales soaring—and brick-and-mortar sales either stagnating or declining—many companies have to walk the tightrope between meeting consumer delivery demands without overspending on transportation.

“Everyone is trying to figure out how to be more efficient and cost-effective with their transportation,” says Bill Brooks, vice president, North America transportation portfolio at Capgemini. “Typically, innovation is the path to getting there—be it tracking mechanisms, reporting capabilities or some other advancement.”

Knowing that the global pandemic isn’t the first supply chain disruption to affect the transportation markets—and that it won’t be the last—more shippers are using transportation management systems (TMS), digital freight management (DFM) platforms, and other advanced technology tools that can help them ride out the storm and prepare for the future.

DFM platforms like Convoy and Uber Freight, for instance, help streamline the truckload (TL) market by using technology to match up shippers with available drivers. By automating the transportation management process, they also give shippers access to real-time analytics that they can use to make good transportation decisions.

Other organizations are working to establish deeper, more collaborative bonds with their transportation and technology providers, all in an attempt to “even out” the fluctuations brought on by the events of 2020. “Using platforms like SemiCab and Lanehub [now part of Transplace],” says De Muynck, “shippers are collaborating with their partners to forecast capacity and gain better visibility over their supply chains.”

De Muynck says freight brokers and third-party logistics providers (3PLs) are also exploring new ways to manage freight in the current marketplace and to prepare for what’s coming around the next corner. He points to GlobalTranz as one example of how a 3PL has transformed a portion of its full truckload (TL) business into a tech-enabled platform. The company rolled out its GTZamp DFM solution in mid-2019.

“GlobalTranz is acting almost like Convoy for part of its business,” says De Muynck, who expects more of this in the future, and particularly if carriers continue to maintain the upper hand with capacity, rates and rejections.

“Carriers are in a good place in terms of demand, and they can afford to be picky about who they want to deal with, what freight they want to accept and so forth,” says De Muynck. “The digital model is another way for carriers to answer questions like, who do we want to engage with? Who makes it easier for us to engage with? Who treats us right? And, who pays us on time?”

The freight continuum

Up until two years ago, most companies have purchased a set amount of freight transportation via an annual bid process, and then modified that contract as needed as their freight demands increased or decreased. That changed in 2018, when capacity crunches and driver shortages took hold of the industry. Fast-forward to 2020, and the annual bid is once again proving useless as companies scramble to secure capacity at the right price and with the best possible terms.

“We’re back to a tight crunch again,” says Chris Caplice, senior research scientist at the MIT Center for Transportation & Logistics. “Everyone has formally recognized that the market is going to go up and down, so trying to reap the benefits in each of these peaks or valleys just doesn’t make sense long-term.”

Caplice says both shippers and providers have also come to realize that all freight isn’t the same, and that it shouldn’t be treated as such. For example, every company should have a portfolio of ways of interacting with the different carriers. “If you have a lane that ships once every quarter,” he says, “you’re not going to have the same relationship as a lane that has 20 loads a week or 10 loads a day.”

By assessing different characteristics across carriers, networks, and even individual lanes, shippers can come up with a more dynamic freight management approach.

“Think of the [freight] portfolio as an extreme continuum,” Caplice describes. On one end is the private fleet/dedicated fleet, where the shipper owns the utilization and controls the use of that asset. The spot market lies at the other end of the spectrum, and contract is smack in the middle of both.

“Shippers and carriers are both recognizing the need to look at the entire network and all the different lanes that they’re trying to secure a relationship with,” Caplice says. “Then, they can decide what part of the continuum will work best—spot, dedicated or some form of contract in the middle.”

Across the entire continuum, Caplice says technology is helping to improve visibility and giving both shippers and carriers the ability to address problems and cover capacity. This trend will likely continue as technology evolves and as more companies embrace it. “We’re already seeing improvement in this area,” says Caplice, “thanks to the use of machine learning, better pattern matching, and other approaches to matching capacity with demand.”

Crystal ball

Less than a year ago, Carly West was handling logistics for a multinational healthcare services company. She brought that hands-on experience along to her new role as director analyst for Gartner’s Supply Chain Transportation Technology Team, where she’s now assessing companies’ logistics needs and top trends from the other side of the table, so to speak.

West’s perspective on current and future freight management trends is largely rooted in boots-on-the-ground experience. “We always used to joke that transportation was just a necessary evil,” she says, “and not something that many large companies invested much capital into in terms of building and automating robust transportation systems.”

That changed when the global pandemic came into view and began disrupting the world’s supply chains, making transportation much more than just a necessary evil. And while the pandemic as a whole has exacted a steep toll on human lives and livelihoods, it’s also pushed more organizations to rethink how they manage their logistics and freight operations.

“People are really starting to realize that yes, we do need to invest in technology and automate transportation-related processes,” says West. “That’s the primary feedback I’m hearing lately from end users.”

Looking ahead, Brooks expects the automation of freight management to continue over the next few years, but he cautions shippers not to assume that there is one “silver bullet” solution that will solve all of their transportation woes. He expects artificial intelligence (AI), machine learning (ML), and the Internet of Things (IoT) to play bigger roles in this evolution by providing shipment visibility, exceptions management, and risk management tools that address issues like weather and traffic.

“Whenever you can take a handwritten bill of lading, digitize it, and then report on it in a matter of seconds, it changes everyone’s world,” Brooks concludes. “As these and other advancements become more prevalent in freight management, they’ll dramatically drive down the costs and improve efficiencies across the board.”