How technology and relationship-building are helping carriers navigate the volatile LTL space
Authored by SMC³ on November 30, 2021
The volatility of the transportation industry in 2021 underscores the importance of sharing quick, useful information. As part of the recent SMC³ LTL205 interactive educational session, Geoff Muessig, executive vice president & chief marketing officer at PITT OHIO, and Dirk Willett, director of national accounts at AAA Cooper Transportation, discussed the forces changing the shipper/carrier relationship and how both sides can proactively prepare for the future.
Willett said rapid advancements in data and decision-making are accelerating baselines like never before. “Having proactive knowledge allows this industry to work much more efficiently than we ever have in my 34 years,” he said.
Looking toward the future, both said change will happen incrementally, but with a few notable trends. Muessig cited an opinion piece by Daniel Yergin and Peter Tirschwell of IHS Markit in which they considered the solution to the current supply chain crunch a combination of “more and less:”
- More transportation workers
- Less consumer demand
“People don’t need second and third washing machines, right?” Muessig posed. “You’re going to start to see more spent on restaurants. The issue around more workers – frontline workers, drivers, warehouse staff across every mode – that’s going to be more nettlesome.”
Willett added that “the equation of supply and demand has changed so dramatically. The pricing component was closer to the top of the list of priorities. For the first time in my 30 plus years in this industry, what I am recognizing is that while price is still important, capacity assurance is far more valuable and important to the shipper base today than it has ever been.”
That pressure on carriers to be more efficient has been difficult, of course, but Willett sees a bright side: “[New technology] has not only made us more efficient, but it’s going to make us better business partners in the future as well.”
Investment in data is a common theme for LTL shippers amid the changes of the last few years. Those technological improvements span the transportation space, including trailer tracking. Common in the truckload space, trailer tracking is coming into its own in LTL – and, according to Muessig, paying off: “It makes us more efficient in our yards in terms of inspecting and knowing what is where, but we’re also seeing excessive dwell times now at some shipper locations and consignee locations. Candidly, we were trying to manage that all by paper and things were falling through the cracks.”
Willett said AAA Cooper’s approach relies on the concept that “while the shipment itself is important, the information associated with the shipment is equally important – if not more important.” For him, it’s important to share that information quickly with all parties. Innovations like GPS tracking, shipment visibility and digital bills of lading reduce time spent on the phone, which allows shippers to redeploy resources where the company needs it most. “It’s a significant value driver.”
Both carriers said they use visibility insights to help improve relations with shippers and 3PLs, namely by reducing rate changes. “When we’re able to gather data on the front side,” Willett said, “we can cost it more accurately, and we can predict pricing along with that. We can eliminate the significant rate increases that oftentimes used to happen shortly after we would onboard business.”
In discussing the shipper/carrier relationship, Muessig made the important distinction between transactional shippers (those who make shipping decisions based only on the price of freight, rather than the total cost of shipping) and strategic shippers (who prioritize total cost, meaning they might pay more for shipment to achieve overall lower logistics costs). Naturally, their priorities will differ – and so will their tolerances for higher shipping costs.
“In a market that looks like today with tight capacity, the transactional buyer is probably getting squeezed,” Muessig said. “So maybe if you go back [a year], they were able to capture great pricing for a short period of time.” Smart LTL carriers make room in their portfolio for both transactional and strategic business to maintain a “level set” of shipments – “but the strategic buyer is really in it for the longer term,” Muessig added. “That’s where you build relationships and solve problems. That’s where you identify points of friction and then you work to reduce them.”
The session closed with a short discussion about the long-term impact of capacity constraints. How long could we be looking at our current landscape of too much demand and not enough supply?
“I don’t know that it’s a new normal, but I don’t see a change any time soon,” Willett said. While staffing continues to be constrained, carriers will need to think about “how do we come to the marketplace and make ourselves attractive so that people will want to be a truck driver? And until we address that challenge, I don’t think the supply and demand equation we’re currently in is going to change much.”
“I think if you want to look at the short-term, I expect the current LTL situation to continue at least until the second quarter [of next year,]” Muessig added, noting that inflation is likely to affect all areas of the US economy for the foreseeable future – leading to higher costs, higher wages and higher prices. “These are volatile times.”
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