Ending on a High Note: Expert Panels Share Key Trends That Will Create Path to LTL Growth Amid Ongoing Disruptions
Authored by SMC³ on July 26, 2022
The final day of the SMC3 Connections 2022 supply chain event may have been short, but the sessions packed in some deep insights and confident projections on the LTL landscape.
LTL: The most valuable letters in transportation
The day opened with an optimistic and inspiring outlook on the future of LTL with Forward’s Tom Schmitt. “We are very fortunate,” Schmitt said, “We own the most valuable letters [LTL] in transportation for the next many years to come.” He recapped a recent report from FedEx, forecasting that LTL will become the most valuable commodity in transportation over the next several years, with margins likely exceeding 20%. “Here’s a global corporation saying express is going to be fine, ground is going to be slightly better, and LTL is going to own it,” he said, “People are picking up on the fact that to get precision execution at the right sizes across the U.S., LTL is the place to be.”
But Schmitt stressed that challenges still abound in the LTL landscape — and capturing the growth opportunity requires strong leadership. He ticked through his own list of strong leadership principles — from prioritizing employee health equal to business health, “communicating with two ears,” and leading with integrity, to looking at 100% of the talent pool. “Diverse companies that tap into 100% of the talent pool perform better,” he said, “But we’re not there yet.”
The biggest key to success? “Focus surgically on what you do best,” Schmitt advised. Looking back over the tumult of the last few years, he said, “the best got better by focusing on the main thing. Others got lost, distracted.” Once companies have figured out what that “main thing” is, Schmitt says they need to take a hard, honest look at every aspect of their business, and ask, “Do they stand on their own merit? And if so, do they make the main show better?”
Shippers looking to technology to tackle rising challenges
The day’s second session, “Performing Under Pressure,” opened by ticking off the list of major challenges the industry is facing right now — the unpredictability and volatility that now defines the landscape, augmented by continued supply chain disruptions, changes in consumer behavior, rising inflation and now the threat of a potential economic downturn.
“Shippers aren’t quite sure what’s coming next. On one hand, they’re willing to pay up to make sure that they have capacity. On the other hand, they see the prices are dropping so they don’t want to be overpaying,” said Doug Waggoner, CEO of Echo Global Logistics, “And so there’s just a lot of stress around balancing service, access to capacity and getting it at the right price.”
So, how are shippers and 3PLs using technology to respond to these challenges and mitigate volatility? The panel of speakers focused on a few key themes they all recognize:
- Shippers looking to data to unravel complexity
“More than ever, what [shippers] want is information,” said Bobby Harris, Founder and CEO of BlueGrace Logistics, “That’s the theme of this year: Give me more information and make it a lot quicker.” But Harris cautioned that more raw data isn’t the answer. Shippers are already swimming in Big Data — they’re looking for technology that can make sense of all that information and focus their attention on actionable insights.
- Investing in automation
“Everybody’s trying to drive as much automation as they can,” said Renee Krug, CEO of Transflo. Krug said she sees shippers making more proactive investments in automation technologies — and a lot of focus on automating back-office operations. She reflected on Transflo’s experience as emblematic: “We’re trying to figure out: How can we, as a 3PL, grow at 30% and have that back-office piece be seamless and live with our growth?” Krug added her own cautionary directive to companies looking to increase automation: “You don’t want to automate a bad process,” she said, advising that companies need to think holistically about how a workflow or process lives within an interrelated ecosystem — and solve for the gaps, weak points, and inefficiencies before they machine that process.
- Leaning on partners to drive digital transformation
Waggoner explained how Echo Global is making big investments in tech — building out their in-house data science team to develop and optimize customized algorithms. But Krug was quick to point out that not every company has the budget to invest in an internal data science team and build AI on their own. This resonated with the others on the panel, who agreed that more and more companies are recognizing the limitations of their own expertise and resources — and looking for partners to help them drive analytics and automation.
- Tech talent shortage is a major limiter
While inflation is hitting fuel prices in a big way, the impacts have so far been less direct for shippers and LTL businesses. But inflation is hitting our industry in another big way: compounding ongoing labor market challenges — particularly for in-demand tech talent. This tech talent shortage is making it harder for organizations to build in-house teams — and it’s also making it more challenging for 3PLs and other tech partners to build and sustain their own teams. “When you’re in demand, you can go down the street and make $20,000 a year more and have lunch served you every day,” said Waggoner.
Signs of an economic slowdown are starting to change the labor market dynamics, however. Both Waggoner and Krug said they’re seeing venture capital-backed tech startups (that tend to lure tech talent away from more traditional, corporate positions) being forced by nervous investors to cut costs in advance of a potential recession. Krug said the resulting layoffs are a “wakeup call” to tech talent, leading many to think, “Maybe it does make sense to stay with some of the established companies that actually will continue to employ you through the ups and downs.”
- Fostering strong internal culture — navigating the hybrid work model
Shippers and 3PLs have little control over the macro-economic factors driving changes in the labor market, but the panel of CEOs talked about how they’re working to create a magnetic internal culture that will attract and retain top tech talent. “We’re trying to do everything we can to make it a place where you want to stay and build an organization,” said Krug.
The CEOs agreed that one of the biggest internal struggles is navigating the challenges of hybrid work models that companies have been forced to define on the fly. Businesses are in various states of “return to office” that is impacted by the geographic location of the office (urban vs. suburban) and often varies by team or role. Some types of roles have proven much more conducive to remote work, while others require or greatly benefit from face-to-face communication and collaboration. The panel also agreed that, while attitudes on remote and hybrid work models depend on a complex intersection of age and tenure, all workers are demanding greater flexibility and control over when and where they work. The challenge is becoming less about ensuring productivity, and more about how to provide that flexibility while still fostering a genuine, immersive company culture that keeps people engaged.
Harris of BlueGrace Logistics offered a fitting conclusion to this discussion: “Flexibility is important,” he said, “But what we do find interesting is that the people that come into work — typically you have a lower loss rate on them, and they’re also happier on their surveys.”
What will the next wave of disruption bring?
Shippers and 3PLs have enough on their plates just managing the myriad challenges in front of them right now. But if we’ve all learned one thing from the last three years, it’s the value of being prepared and planning ahead to enable empowering agility. The final session of SMC3 Connections 2022, Predicting the Next Wave of Disruption, gave attendees several key trends upon which they can build their plans:
- Supply chain (permanently?) disrupted
The panel of experts all remarked on just how terribly tangled the web of supply chain disruptions has become in the past few years — and agreed that there is simply no easy way out of this mess. For example, with key ports coming back online and long-delayed shipments finally arriving, warehouses around the world are now overwhelmed. “I’ve heard companies have 30-40% more volume than their warehouses will hold today,” said Julian Ludlow, Co-Founder and President of FragilePAK, “So now you’ve got a whole issue going on in a number of the cities where there is no warehouse space.” Moreover, Ludlow noted the chassis shortages that are keeping arriving shipments stuck at port.
- Continued growth of ecommerce
The panel agreed that the shift toward ecommerce will only continue. “They’re forecasting [ecommerce is] going to be 20% to 22% [by 2024],” said Ludlow of FragilePak, “And there’s some numbers that put ecommerce up as high as 40% by the time we get to 2030.” Rising inflation could, counterintuitively, contribute to ecommerce growth. For example, Karl Manrodt, Ph.D., Professor of Logistics and Supply Chain Management at Georgia College and State University, suggested that rising fuel costs could lead more people to shop online to avoid driving to and from stores.
- Consumer habits aren’t going back to pre-covid
The panel pointed to consumer habits they say have permanently changed as the key factor driving ecommerce growth. “People are ordering online great deal more, but they also are ordering three pairs of shoes so they can return two of them if they don’t like them,” said moderator George Lauriat, Editor-in-Chief of American Journal of Transportation, “So we have a level of reverse logistics that didn’t exist [before].” “I don’t see people changing their habits back,” concluded Dan Heinen, President and CEO of Kleinschmidt.
- Digital transformation accelerates
The pandemic forced shippers and 3PLs to make the sudden shift to remote or largely remote work. Heinen of Kleinschmidt says that the shift exposed the many built-in inefficiencies, bottlenecks and gaps in manual workflows and legacy processes. “A lot of what we heard [from our customers] was, ‘Help us get more digital,’” Heinen said. This echoes a key theme from the previous session: the push for digitization, automation, Big Data analytics and cloud connectivity. “You have to have the networks and the software and all of your procedures in place to be as effective, whether you’re in the offices or not,” said Heinen.
- Cyberattacks on the rise
Heinen warned that cyberattacks were rapidly becoming one of the biggest disruptors in the industry. Cybercrime has become a big, corporatized world — and remote work, hyperconnectivity and the Internet of Things are all converging to create a perfect storm of opportunity for hackers and risk for businesses. “I can’t stress enough that you keep your systems up to date and you take care of your data as if it’s gold — because it is,” Heinen said, “You have to be so diligent in how you build out your networks.”
Perhaps even more important than implementing and maintaining the right technology, Heinen said, is training your people. “Most of these attacks are coming because of bad password utilization, phishing and all of those things,” he explained, “It’s about making sure your people are trained correctly because those holes are the ones that are the easiest to manipulate and get in on.”
- How do you build a resilient culture?
This insight on cybersecurity — that your people are your most important asset (or liability) — leads directly to another discussion on the challenges of the incredibly tight labor market. The panel focused on the need to find people that thrive amid uncertainty and live to solve new problems. “It’s more than just being a good software developer or whatever the case may be,” said Heinen. Rather, companies should be looking for an agile, adaptable mindset that’s ready for an increasingly disrupted landscape. “We look for people who are naturally inquisitive,” Heinen said, “Are you looking into the future? How do you look at the world outside of where we’re at?”
Hopeful outlook for industry
In spite of all the challenges discussed, this final session on future disruptors ended on a surprisingly optimistic note. The upshot of the unprecedented challenges faced by the shipping and logistics industry in the past few years is that “The general population are more aware of logistics and supply chain today than they ever have been before,” said Ludlow of FragilePAK. “The effect: I think there’s more value perceived in what we all do on a day-to-day basis,” he said, “And I think that through that there will be, hopefully, better revenue and better profit and better growth as we go forward.”
Ludlow’s hopeful sentiment echoes Tom Schmitt’s inspiring conclusion at the end of this morning session: “I do believe that what we can control so is so much bigger than what we cannot control,” Schmitt said, exhorting his peers in attendance to “choose to be the lead actors and the directors of our own movie and lead our teams,” and ending with a bold projection on the looming worries of recession: “We probably are in a recession. We just don’t know it yet. I’m saying bring it on,” he said, “This will be short, and we’ll get out of it very quickly.”
The three-day Connections supply chain event produced annually by SMC3 provides the ideal environment for qualitative, valuable networking and industry education. Carriers, shippers, logistics service providers and technology providers consistently attend the summer’s premier collaborative supply chain intelligence event for its unrivaled networking opportunities, top-tier presenters, and timely content to finish 2022 strong.
To learn more about SMC³ supply chain conferences, visit https://www.smc3.com/supply-chain-education.htm