From cloud-based systems to transportation management, the state of the logistics industry is evolving to expand an increasing number of services. Meanwhile, the overall capacity of shipments is climbing higher, reports Jeff Berman of Logistics Management, and the driver shortage is becoming more essential as full truckload shipments decrease. Although an initial view of the logistics and freight industry seems stale, it represents how the flow of goods and services are sprouting and delivering more with fewer resources. Take a look at some of the most compelling factors that are playing into the current state of the industry.
1. Less-Than-Truckload Exhibits Growth Despite Limited Industry Growth.
Moving as much product as possible is critical to continued growth in the industry. However, recent years have seen more shippers turn to less-than-truckload (LTL) and freight consolidation with full truckload (FT) to reduce the number of trucks on the road. Many of these trends were in response to unforeseen surges in fuel costs and regulatory fees, but lower fuel charges over the last year have helped to reduce the urgency to avoid FTs at all costs. Instead, today’s shippers have found the overall savings can be achieved through a renewed focus on using LTL and freight consolidation to enhance the amount of product moving to diverse places.
It would seem as though all FTs are being eliminated, yet this is simply not true. FTs continue to make up a vital part of the industry, especially for shippers who need to move large volumes of product across vast distances. The key to understanding this symbiotic relationship lies in how the behaviors of today’s consumers. As more customers order more products online and through omni-channel solutions, the need to reach a wider market will subsequently increase. However, each customer or retailer may not be able to justify the costs of purchasing a FT of a shipment, which would leave the original seller with a loss. Therefore, the sellers must keep their minds open to how competition among shippers can help the industry grow, even if it is minimal when compared to the records of the past.
2. Shippers Are Facing More Competition.
Competition is a healthy part of any industry. It enables the production to keep prices low by making each entity accountable to the end users. With the expansion of the industry in the past few decades, especially during times of record-breaking growth, as explained by the 2016 Third-Party Logistics Study, more third-party logistics providers (3PLs) have risen.
Emerging markets are driving shippers to consider the political, environmental and consumer-driven demands of new areas. Unfortunately, the focus of shippers has shifted away from any 3PL to the best 3PL. So, the conversation needs to turn toward another aspect of how 3PLs influence the state of the logistics and freight economy, digitization.
3. 3PLs Expand Services Further.
- Data-driven decision making.
- Better assessment of rates.
- Feedback from consumers and partners.
Major players have used These technologies for years. However, it was not until cloud-computing capabilities dawned that smaller entities could actually influence the market. In other words, smaller players in the market mean larger entities need to focus more on how to squeeze greater profits out a stretched operation. The answer to the problem was already in work when 3PLs began to ponder the ideas of value-added services (4PLs).
Unfortunately, value-added services are something that cannot simply be instilled without work. They involve the use of low-energy, connected devices, which are then paired with the technologies of the Internet of Things, and radio frequency identification (RFID) measures to gain greater visibility, which helps the supply chain learn how to adapt in real time. As a result, supply chain entities can eliminate any fat to reach an unparalleled level of lean and agile processes. Unfortunately, the problem with much of today’s supply chain rests on traditional operations.
When executives in the supply chain were reviewed for capability in the digital supply chain, most respondents fell short. Either they did not understand how their operation was involved in a digital process, or they were incapable of discerning what digitization means. Therefore, the role of the 3PL is starting to encompass teacher and trainer, as well as provider. This will only serve to help the current state of the industry continue on a slow path toward growth. However, the issue of drivers’ needs must also be considered in today’s supply chain.
4. The Demands of Today’s Drivers.
The supply chain of 2016 is not completely operated by robots (at least not yet). So, the biggest question about the state of the industry needs to think about who is getting products from A to B—drivers.
The driver shortage is evident, but the actual number of driver positions is climbing. Shippers are dealing with lost costs on 75 out of 500 trucks without an adequate number of drivers. Having the fleet in place is one step, but how do today’s shippers entice the drivers to come back? Like many occupations, it goes back to satisfaction, appreciation and time.
Shippers are doubling down on efforts to make hauls shorter, which is catalyzing a stronger push toward LTL and intermodal shipping options. Since the number of options has increased, even though capacity while at work has not really changed, more shippers are turning to 3PLs to realize their full potential. For those entities who do work with 3PLs, approximately 93 percent of shippers-client partnerships are reported to be “successful.”
By reducing overall logistics’ costs, supply chain entities can devote more time and resources to creating a driver-conducive environment, which may include shorter drive-times, less time spent waiting on shipments and less stress on the operation. As a result, drivers will be more likely to stay with their current employers throughout 2016.
Think about another aspect of the driver shortage. 47 percent of all workers in the U.S. are female, and only 6 percent of trucks drivers are female. Meanwhile, the average age of today’s truck driver is 47. In less than 20 years, the average truck driver will be retiring. As a result, the need for more drivers is only growing more prevalent. Today’s shippers will need to start making millennials and second-career-goers see how beneficial a career in trucking can be. In other words, a small investment in diversifying truck drivers’ “load-scape” today could be the push the industry to meet the demands of the future.
Logistics and Freight Economy: Putting It All Together.
The logistics and freight industries of 2016 seem stale, but it is actually within the margin of error of record-breaking patterns in the past. The industry is experiencing growing pains, but even with trouble, growth is still occurring. The logistics and freight economy is evolving to include more factors than imaginable, and 3PLs are leading the charge to reclaim a better, more productive logistics and freight industry. By understanding the four major factors that are impacting the current state of the industry, supply chain executives and thought panels will be able to see what focuses can lead to stronger growth in the coming years.