January 16, 2019
In this article, Charles Marrale (CEO of ExFreight) breaks down the leading logistics trends into a few snapshots. He feels these trends are having a real impact on the industry and are a sustainable realistic technology that will eventually go mainstream.
“There are several trends in logistics technology right now. Most of the trends are being driven by the need for more efficiencies in moving freight and reducing labor costs which have surged due to a very tight labor market. The Amazon effect of providing a seamless global distribution through a simple and easy to use website has driven all sectors of the transportation market to invest heavily in technology updates that will improve the customers interaction with their company and at same time improve efficiencies in the process of moving shipments from A to B. Here are a few snapshots of the leading trends in my opinion that are having a real impact on the industry and are a sustainable realistic technology that will eventually go mainstream.
Demand for international freight has increased as global trade has increased over the last few years. More and more companies are becoming brands and outsourcing their manufacturing to small run manufacturers who are shipping small batches on demand. You see a lot of new ideas and companies evolving from kick-starter campaigns and new existing brands experimenting with new products in smaller releases. In addition to those trends a lot of smaller manufacturers are now selling online to the world through services like Alibaba. This is leading to a lot of inconsistent ad-hoc cargo demands that does not work well in a typical freight forwarders environment where quoting is a manual process that cannot sustain low quote to booking ratios. A few forwarders have realized the opportunity and have digitized their business and are providing instant global pricing to allow for these manufacturers and brands to instantly price unlimited amounts of opportunities. Digital forwarders leading the way in this new instant pricing market are Exfreight Zeta (our company), Flexport, and Freighthub. To complement and aide the freight forwarders in digitizing their business a few SAS companies have started to provide TMS solutions that allow other forwarders to provide instant pricing – Freightos, Freightalia.
Not to be confused with instant international freight pricing, a small segment of carriers have started to offer on-demand instant pricing which allows the carrier to offer a set block of space on their airplane, truck, vessel at set rates which can instantly be adjusted based on demand and space availability. This was not feasible a few years back but with the advent of transition to instant API pricing in North America it’s not possible for a carrier to set up on demand pricing that adjusts to the market conditions.
Air France and KLM and a few others are leading the way here with per flight pricing on some select markets. Even though it may seem logical that the efficiencies to maximize revenue to available space there are some downsides to the trend. The most glaring being that digital forwarders can easily integrate the per flight pricing but they cannot control the delays in the first leg of transport from the shippers warehouse to the airport. So inevitably the rates will most likely be used in a manner to plan additional savings for the forwarder only once the freight is on-hand at the airport and not passed onto the shipper in order to avoid any costly booking cancellation fees when a shipment is delayed in transit from shippers warehouse to airport.
Truckers like YRC, are now starting to offer trucking rates based on local market conditions that change weekly. The service is accessible via their API and will provide spot quote and a date range for when the shipment must be executed for the rate to apply. This allows YRC to keep their trucks full on backhaul lanes or on lanes where seasonal conditions create a need for more freight. It’s also allowing them to keep unprofitable freight off heavy headhaul lanes. Other carriers like UPS, ESTES, OLD DOMINION are using a similar system but in a slightly different manner. They are focusing on providing ad-hoc rates for volume LTL shipments on select lanes, thereby allowing them to fill backhaul lanes with larger shipments when needed. The upsides for the carriers are huge however most shippers only have access to these types of rates through a 3PL or by logging into multiple carriers websites. Due to the market phenomena in US trucking whereby freight seems to find flow to the lowest price due to ultra competitive 3PL pricing strategies and sales reach within the small to medium sized shipping community, this new ad-hoc on demand pricing could end up disrupting the carriers margins if its employed by a large number of carriers. The idea being that a carrier will dispute other carriers regular freight and cause the other carrier to all of a sudden have a need lane which would create a drop in their pricing and then disrupt the rate to bottom.
Traditionally ocean liners like Maersk, OOCL, HAPAG LLLOYD etc have set up their vessels with a majority of contracted space allocated to the large importers/ exports like Walmart, Home Depot etc and then reserved a fraction of the space to float on a spot market based rate that would move up and down based on the space available and booking forecasts. During heavy bookings the rate would go up above the annual contract rate levels and during low booking period the rates would go below some contracted rate levels. During some of the last peak seasons and tariff rush, lack of space has caused problems for both contracted rate customers as well as spot market customers. The contracted customers who had agreed to a set rate and volume commitment were frustrated because they couldn’t get space on any vessels even though the liner signed a commitment to allocate the space. The spot market couldn’t pay enough for space because there wasn’t any. Both needed space that wasn’t there, this created an opportunity for a new type of rate brought about by companies like NYSHEX which arranged for space to be sold on a guaranteed basis with penalties to both the shipper and the liner if they fail to meet their end of the booking ( space / Freight ). The idea has solved some of the problems for some shippers who were frustrated with rolled bookings however when volumes decline and space becomes abundant again, will the idea continue to work? The liners are not financially stable enough to hold out on pricing for higher margins and will take whatever they can get to fill the space, and they will slide back into annual contracted pricing to ensure their vessels are full year round.
Thanks to the evolution of technologies customers expectations get higher each year. Various companies are now capitalizing on this need for instant gratification and notification of shipment status and are mapping exact locations of shipments globally using a combination of different available technologies.
With the advent of public AIS data, companies like marinetraffic.com are now able to provide up to the minute location of vessels on the water. Other companies like Ocean Insights, and Project 44 have created a business assisting forwarders with tracking all their containers using a combination of carrier direct tracking and public AIS data to push tracking status into Freight forwarders TMS systems which in turn is put in front of the direct shipper to show where their freight is at any time of the day.
Everyone knows you can now track your family and friends flights using multiple apps like flightaware.com but logistics companies are now using this data and tracking results from airline EDI/API feeds to plot customers freight location on a map. Other aggregators like Champ Cargo Systems are taking data from airlines and flight locations and providing them back to freight forwarders for use in their TMS systems. This again allows for a much richer experience for clients of the freight forwarder to see where their freight is at any time of the day.
With the new requirement for electronic logging for drivers hours of service in the US trucking market, and other markets around the globe following suit. An opportunity for carriers to provide up to the minute location of shipments, based on live ELD data, is allowing carriers to transmit data on shipments electronically to clients. This data is being used by many companies for various purposes from providing vital info on perishable shipments to allowing manufacturers to know when their shipment will arrive instead of having staff wait on the dock for hours. In other instances the information is being used by insurance companies to calculate risk and offer better premiums for fleet insurance. Additionally the data allows for more optimized dispatching and truck routings to avoid trucks sitting idle in traffic and avoid missed pick ups.
There is grave concern for the future of trucking in the US, Canadian, and European markets due to a shortage of truck drivers entering the market and a large number of drivers who will be eligible for retirement in next few years. Trucking companies in the US believe some of the blame lies in the DOTs rules for CDL licensing that require drivers to be over 21 years old for interstate driving. That has prevented trucking companies from hiring potential drivers right out of High schools because other sectors of the economy specifically building trades have provided young 18 year old adults a better income right out of high school than what a trucking company can provide working a dock or doing intrastate only work. Some trucking companies have become creative by utilizing smaller box trucks for city runs that don’t require CDL licenses, however there is still a shortage. The shortage is very prevalent in the long haul interstate runs that require a driver to be away from his family for many nights of the year. Due to the pressing needs of the market a few creative companies have tried to address the issue with autonomous driving vehicles.
A few companies have created some final mile autonomous delivery vehicles that look promising pending regulatory approval these ideas could be a more realistic delivery method compared to drones. UDELV has created a self driving locker type truck that is loaded at a distribution plant and then sent on a delivery route. Customers are notified once the truck is approaching and they come outside to greet the truck. Once the truck arrives they can open the specific locker in the truck where their shipment resides with a click of the app on their phone. Starship Technologies has created another interesting final mile delivery vehicle that is currently being used for fast food delivery. The units are small and built for single deliveries however one can see the potential of a larger unit based on the small robots capabilities.
Otto was one of the first to develop the technologies for self driving trucks. Even though it was purchased by UBER Trucking and later put on hold other companies like Tesla, Volvo, Peterbilt, and Daimler are still pursuing the autonomous driving technology for trucks. Due to the pressing driver shortage there is a need in the market and its inevitable that the technology is eventually mature enough to be used in the market. One can imagine a city driver driving a truck to a designated truck stop at the edge of a freeway and then setting the computer for a cross country journey and then stepping out of the unit and allowing it to continue on the highway by itself to a destination truck stop near the final delivery location where another local city driver finished the job.
If autonomous driving trucks become prevalent in the market there could be a lot of disruption brought on by large shippers like Amazon, Home Depot, Walmart no longer needing established trucking companies and their networks and large organized workforce to move their goods. Additionally, the cost of entry into the market would be lower and it may create some exciting opportunities for Venture Capitalists to use their vast funds to buy their way into a large national trucking fleet with a minimal workforce.
In conclusion, the future is bright and ripe for disruption and these are only a few of the technologies that are setting the stage for a new set of winners and losers in the transportation market.”
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