By using technology and collaborating with their carriers, shippers can mitigate the impact of economic and regulatory trends that are driving up truckers' costs.
AS A CONVERGENCE of economic, regulatory, and technology trends alters the playing field, the trucking industry is undergoing a period of significant change. These trends will give rise to new challenges and opportunities, and it will be important for shippers to understand them as they seek ways to control transportation costs—often by working with trucking companies on mutually beneficial initiatives.
Economic trends
Truckload volume is once again experiencing stable growth, after suffering a nearly 25-percent drop during the recession of 2008-2009, according to figures from the American Trucking Associations. The accompanying shakeout in the industry—including a record number of carrier bankruptcies—led overall capacity in the truckload sector to fall by approximately 15 percent during the recession. By 2011 truckload had regained much of its footing, and volumes grew a healthy 6 percent in 2012.
However, the lessons learned by motor carriers in all segments during the recession, when many of the weaker players fell out, have caused big industry players to take steps to help themselves weather future economic storms. These carriers are initiating major cost-control and efficiency-improvement programs, and they are seeking to improve profitability by reducing empty mileage.
Fuel and labor together represent two-thirds of a motor carrier's expenses, so trends in those areas are key indicators of operating costs. In the last decade, fuel costs have fluctuated significantly, leading to major rate increases and forcing truckers and shippers to seek alternatives to the status quo.
However, the last two years have been less volatile in regard to fuel price changes. As shown in Figure 1, diesel fuel prices are experiencing their longest period of stability in over a decade. Between mid-2011 and mid-2013, diesel prices have ranged between US $3.72 and $4.12 per gallon, a 40-cent variance. Compare that to the prior two-year period, when prices almost doubled, and to the five-year period prior to the price crash in late 2009, which saw prices nearly triple.
Few in the industry believe that the last two years of fuel price stability will continue indefinitely, so truckers and shippers are undertaking efforts to mitigate high diesel prices. One approach is the expanded use of liquefied natural gas (LNG). Natural gas operations can reduce per-mile trucking costs by 20 percent or more, and the incremental cost of natural gas vehicles can pay for itself relatively quickly. To fully capitalize on this opportunity, however, it will be essential to expand the LNG fueling infrastructure.
Labor costs and availability could potentially be less predictable than fuel costs in the years ahead. The trucking work force, largely made up of middle-aged "baby boomers," is facing a growing driver shortage as older drivers retire and the occupation becomes less attractive to younger people. This is putting upward pressure on driver salaries and making driver recruiting more difficult.
Regulatory trends
As part of the Federal Motor Carrier Safety Administration's Compliance, Safety, and Accountability (CSA) program, the agency has promulgated a series of new rules aimed at increasing trucking safety. The most significant of these rules involves drivers' hours of service. As of July 1, 2013, the new rule reduces a driver's average maximum allowable hours of work per week by 15 percent, from 82 to 70 hours. This is designed to reduce fatigue among drivers, but it will also limit the available supply of trucking capacity, unless companies aggressively recruit new drivers. Given how difficult it is now to attract and retain new drivers, it's likely that the reduction in hours will compound ongoing capacity challenges.
Federal regulators are also in the process of developing rules requiring electronic onboard recorders (EOBRs) in all trucks as a means of monitoring the safety of motor carrier operations. While some operators see this as an additional burden, many fleets are already adopting EOBRs as well as a broader range of telematics tools to increase fleet safety and efficiency.
Technology trends
The impact of technology on the trucking industry extends well beyond what is being required by federal regulators. Improved telematics and mobile communication devices provide trucking companies with dramatically improved visibility into the location and productivity of their trucks, enabling fleet managers to increase efficiency in a targeted way.
Route and load optimization software is helping companies deliver more loaded tons per vehicle mile, which significantly reduces empty trips. The combination of telematics devices and back-office optimization systems helps trucking companies better manage their work forces and integrate their operations with those of their partners in the supply chain.
Implications for shippers
On balance, the economic, regulatory, and technological trends discussed here almost certainly will put upward pressure on freight costs. The driver shortage and further restrictions on drivers' work hours will likely increase labor rates and potentially limit available capacity. In response, some trucking companies are diversifying more into intermodal operations, which can help them keep costs under control and hedge against a labor shortage or fuel cost increases.
In this environment, shippers would be well served to continue to better integrate their supply chain with their logistics and transportation service providers. They can do this most effectively by gathering and making use of all available real-time data, which will allow them to identify and take advantage of the most efficient and economical choices at any given time. Shippers also may benefit from using software that forecasts and tracks shipments to match their loads to operators' available capacity, such as the excess capacity that's often available on backhaul routes. While it will not be easy for some companies to undertake some of these initiatives, it is an effort well worth making.
Trucking is indeed facing pressures that can drive up costs, but the innovations and technological advances that are becoming more widely available can enable shippers to maintain economical transportation options.
The venture-backed fleet telematics technology provider Platform Science will acquire a suite of “global transportation telematics business units” from supply chain technology provider Trimble Inc., the firms said Sunday.
Trimble's other core transportation business units — Enterprise, Maps, Vusion and Transporeon — are not included in the proposed transaction and will remain part of Trimble's Transportation & Logistics segment, with a continued focus on priority growth areas following completion of the proposed transaction.
Terms of the deal were not disclosed but as part of this agreement, Colorado-based Trimble will become a shareholder in Platform Science's expanded business. Specifically, Trimble will have a 32.5% stake in the newly expanded global Platform Science business and will receive a Platform Science board seat. The company joins C.R. England, Cummins, Daimler Truck, PACCAR, Prologis, RyderVentures, and Schneider as a key strategic investor in Platform Science along with financial investors 8VC, Activant Capital, BDT & MSD Partners, Softbank, and NewRoad Capital Partners.
According to San Diego-based Platform Science, the proposed transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which will give customers access to more applications and offerings.
From Trimble customers’ point of view, they will continue to enjoy the benefits of their Trimble solutions, with the added flexibility of the Virtual Vehicle platform from Platform Science. That means Virtual Vehicle-enabled fleets will receive access to the Virtual Vehicle Marketplace, offering hundreds of new and expanded applications, software, and solution providers focused on innovating and improving drivers' quality of life and fleet performance.
Meanwhile, Platform Science customers will enjoy the added choice of Trimble's remaining portfolio of transportation solutions which will be available on the Virtual Vehicle platform, the partners said.
"We believe combining our global transportation telematics portfolio with Platform Science's will further advance fleet mobility and provide our customers with a broader portfolio of solutions to solve industry problems," Rob Painter, president and CEO of Trimble, said in a release. "Increased collaboration between the new Platform Science business and Trimble's remaining transportation businesses will enhance our ability to provide positive outcomes for our global customers of commercial mapping, transportation management, freight procurement, and visibility solutions. This deal will result in significant synergies along with tremendous opportunities for employees to continue to grow in a more-competitive business."
The acquisition comes just five months after Platform Science raised $125 million in growth capital from some of the biggest names in freight trucking, saying the money would help accelerate innovation in the commercial transportation sector.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
That hiring surge marks a significant jump in relation to the company’s nearly 17,000 current employees across North America, adding 21% more workers.
That increase is necessary because U.S. holiday sales in 2023 increased 3.9% year-over-year as consumer spending grew even amidst uncertain economic times and trends like inflation and consumer price sensitivity. Looking at the coming peak, a similar pattern is projected for this year, with shoppers forecasted to drive a 4.8% increase in holiday retail sales for 2024, Geodis said, citing data from Emarketer.
To attract the extra workforce, Geodis says it will offer competitive wages, peak premium pay incentives, peak and referral bonuses, an expedited payment option, and flexible schedules. And it’s using an AI-powered chatbot named Sophie to serve as a virtual recruiting assistant.
“We acknowledge the immense responsibility we have to our customers to deliver exceptional service every day, and this is especially true during peak season,” Anthony Jordan, GEODIS in Americas Executive Vice President and Chief Operating Officer, said in a release. “Because peak season is the most business-critical sales period of the year for many of our retail clients, expanding our workforce is vital to ensure we have a flexible, dynamic team that can handle anticipated surges in demand.”