Navigating The Road Ahead: Transportation Planning For 2020
This article appeared in Logistics Brief.
We all know that the transportation market is cyclical, with various factors impacting rates, capacity, and service levels across different modes. The market in 2019 was certainly different than in 2018, and the market will likely change again this year. What lessons from the past two years can shippers apply as we begin 2020? What factors or trends should they pay attention to? How can logistics service providers help shippers navigate through the changes successfully? Those are the key questions I discussed with Mike McLelland, SVP of Transportation at Kenco, during a recent episode of Talking Logistics.
Boom and Bust
To begin, I asked Mike to recap the trucking market in 2018 and 2019 and the lessons learned from these very different years. Mike comments that 2018 was a great year for truckers as a booming economy fueled demand for transportation. “As fast as demand and rates grew in 2018, by the end of the year and into 2019, demand and pricing started to cool off quickly. The lesson is just how fast conditions change in the marketplace. While transportation has always been cyclical, the market now changes at a faster pace.”
“On the other hand, the more things change, the more they stay the same,” continues Mike. “While rates went up in 2018 and down in 2019, creating the inevitable sawtooth pattern, over time the trend is always upward. you have to be more than rate focused to capitalize on the opportunities in the market.”
Transportation Trends For 2020
Looking ahead to 2020, Mike says that shippers always have to look at what is likely to happen to capacity. He notes that GDP is expected to grow at 2.0%-2.5% and also that the second phase of the ELD mandate went into effect this past December. “These will have some impact on capacity, maybe not as much as what happened in 2018, but still some effect. The other thing that could impact capacity is the drug and alcohol clearinghouse that goes into effect January, where carriers are going to have visibility to alcohol and drug abuse when hiring drivers that they did not have in the past. This will likely have some impact on capacity.
“The third area of impact is that shippers are shifting more risk to carriers for cargo and accident liability at the same time that insurance rates for carriers are going up. In fact, insurance rates have doubled since 2010 and it is getting harder to get insurance. This ‘risk shifting’ is also being applied to brokers, especially as asset-based carriers are now offering brokerage services too.”
Successfully Navigating The Road Ahead
Given the rapid changes in the market, I asked Mike what capabilities or attributes shippers should have to successfully navigate the market going forward. Mike points out that while shippers must always keep a pulse on rates as they go up and down, they should also look at ways to cut waste out of their transportation operations. For operations. For example, how can they improve shipping and receiving operations at the dock door to decrease detention charges; or can they match inbound and outbound loads for carriers to get better rates.
Mike also comments that shippers have to stay on top of the vast amount of data that is available. “The amount of information available is enabling transportation professionals to make smarter decisions faster, and that in turn is what is speeding up change in the marketplace,” says Mike. “I think using predictive analytics will be the next step in leveraging this information.”
Leveraging Logistics Services Providers
Speaking of leveraging information, Mike mentioned that logistics service providers (LSPs) can help customers convert data into actionable insights. They can analyze the data, looking both backward and forward, to recommend improvements to customer operations, such as consolidating LTL shipments into truckloads, that will improve service and take cost out of the supply chains; LSPs then have the capabilities to operationalize those changes. They can also help improve quality and support continuous improvement.