How Has AI Automated Freight Procurement To Make Shippers Agile?
No doubt, digitalization is the future of supply chains across the world. It’s no secret that transportation and logistics are slow to advance, and mired in manual processes. And the pandemic certainly put a glowing spotlight on the need to revisit digital transformation within the supply chain. A recent survey by Bain & Company with the World Economic Forum stated that supply chain resilience and sustainability have become priorities for many large businesses. To proactively manage future supply chain disruption, shippers need to be agile and resilient. In other words, they need to be capable of pivoting– to follow what the market demands– on a second’s notice. Do you remember Sears, or what about Blockbuster Video? Both brands failed to adapt to market changes, and either missed or were slow to embrace innovative thinking. It’s unfortunate to think there are many large shippers who are still using archaic procedures within their supply chain. This is precisely why many shippers have struggled over the last 24 months to deliver goods on time, and at fair market price. Static, linear freight procurement procedures were never set up to effectively manage freight market fluctuation. The physical movement of goods is riddled with unknowns, such as natural disasters or shifts in consumer demand, and therefore requires smart tools to support resilience. AI-powered technology has helped many shippers turn static freight procurement processes into dynamic ones. Once the software is configured with the shipper’s unique load attributes and rules, the software goes to work by dynamically sourcing compliant, asset-based capacity whenever and wherever the shipper needs it. With no middlemen, carriers bid directly on loads, so shippers know...
Game-Changing Tech Helps Shippers Manage Freight Market Fluctuation
In order to effectively manage transportation efforts, especially as the freight market bounces up and down, shippers need insights to understand and accurately predict demand for truckload carriers. No doubt, 1st-party data is "king" because it is specific to the user's activities. But when 1st-party data is not available, shippers turn to 3rd-party data. ISM Manufacturing PMI One of the 3rd-party data sources we like to reference is The Institute for Supply Management (ISM) Purchasing Managers Index (PMI), which is one of the most reliable economic health indicators available. Month-over-month, PMI measures changes in production levels, new orders, supplier deliveries, inventory, and employment. A PMI above 50 suggests growth or expansion in manufacturing, while a PMI below 50 represents a decline. If PMI is 50, there is an equal balance between manufacturing reports of expansion and decline. The March 2022 index was 57.1, which confirms manufacturing continues to expand. However, that’s a decrease month-over-month (Feb 58.6%). The 12-month average is 59.7, with May 2021 posting the highest month (61.6). Looking longer-term, PMI is expected to be 54 by the end of this quarter, according to Trading Economics global macro models, and closer to 52 in 2023. Truckload Demand & Pricing As manufacturing activity levels out, so should the truck-to-load ratio and truckload pricing. Dry van load post volumes are getting close to 2018 levels, decreasing 13% week-over-week. While equipment posts increased by almost the same amount. Dry van load-to-truck ratio dropped 20% week-over-week from 4.3 to 3.41 (4% below 2018 LTR levels). These offer a solid indication that the load-to-truck ratio will continue to contract as we head into Summer. There...
Is The Reefer Supply Chain Starting To Balance Out?
2022 has already proven to be one of the most chaotic years yet for freight procurement and the refrigerated season was set to be the same way. However, while many believe that capacity access will once again be an issue, the reality is that there is currently a confluence of factors that may actually free up capacity in certain sectors. In fact, in the last 3 weeks, the reefer load-to-truck ratio has decreased from 12:1 to 8:1 year-over-year. And based on the USDA forecast the reefer supply chain will see improved balance in 2022, and that will impact rates in the spot market. With that in mind, below are several key forecast updates from the USDA that are likely set to drastically change the way that the reefer market looks in 2022. Citrus Forecast The most recent USDA Citrus April Forecast reduced all Florida grown oranges forecast by 3 million boxes – and comes on the heels of concerning news on bacteria spread among orange growers. At ~38 million boxes, this is a 28% decrease from 2021 and a whopping 43% decrease from 2020. To illustrate the gravity, this would be the lowest citrus production in over 50 years! Pork Forecast The most recent USDA 2022 Pork Production Forecast reduced pork production by 65 million pounds. Exports are now expected to fall somewhere around 6.73 billion pounds, that’s a 4.3% decrease year-over-year. Higher carcass weight and increased disease risk contributed to lower slaughter numbers. Cattle & Beef Outlook In contrast to the negative news coming out of pork and citrus, the most recent USDA Cattle & Beef outlook increased beef production by 195 million pounds to 27.570 billion...
Are Shippers Ready For The Next Pivot? Most Are Not.
As Heraclitus once said, “The only constant in life is change.” That certainly rings true for transportation professionals looking to manage ambiguous freight markets. Truckload pricing continues to change, making it difficult for shippers to understand when they are paying fair market cost to ship goods. Load Volumes Declining Truckload.com reported a 9% decrease in total load postings week-over-week, the largest drop so far this year. Volume is down 29% year-over-year, but about 69% above the five-year average for the week. Load availability was slightly higher on the West Coast, but down in all other regions. Spot Rates Declining Many sectors continue to experience improved balance, which is evident in declining truckload prices. For example, dry van rates are down $0.50+ per mile year-over-year, and refer has fallen $0.90+ from December 2021. And because industrial orders fell, flatbed rates also fell slightly compared to January, but are still up 10% from this same period in 2021. One thing to note is this is the 1st decrease year-over-year since June 2020. Unfortunately, the decrease in flatbed rates will be short-lived as we head into summer, which will bring along disruptions due to US infrastructure initiatives, and road construction. Plus, as the US supply chain continues to clean up port congestion, there will be an influx of new industrial orders. Contract Rate Increasing Weakening spot market rates, along with skyrocketing fuel costs in March, overshadowed record-high prices for loads moving under contract. Contracted rates, on average, for dry van increased $0.19 to $3.28 per mile, eclipsing a previous record high set in February. On average, contracted reefer jumped $0.20 to $3.45 per...
Freight Procurement Tips for Refrigerated Season 2022
It is hard to believe that refrigerated trucking season is here. Rising temps, and fruits and veggies ready for harvest, typically bring the busiest time of year for reefer shippers across the US. And unfortunately, this year’s refrigerated season is set to be hectic as a result of massive supply chain disruptions stemming from Covid and the Russia-Ukraine supply chain crisis. Therefore, shippers need to rethink freight procurement by embracing new tools and analytics to successfully navigate this potentially historic (for all the wrong reasons) refrigerated trucking season. Here are a few things in particular that reefer shippers need to keep in mind as they execute their refrigerated trucking strategies. Capacity Situation Remains Fluid A lot has been made of the capacity crunch over the last 24 months. But recently it was announced that the load-to-truck ratio had dropped from 7:33:1 (in February 2022) down to 4:6:1. Spot rates were also on the decline with reefer spot pricing decreasing by ~$0.28 per mile. As the freight market continues to battle back to normal, it will be imperative that shippers have real-time, actionable freight data to quickly identify if/when they are over-paying to haul freight. Advanced freight procurement analytics empowers shippers with data to compare contracted carriers & brokers against true-market truckload cost (based on current supply & demand) so shippers can easily uncover resilience and cost reduction opportunities during this unpredictable time. Labor Shortage Continues to Undermine OTD Despite efforts in both the public and private sectors to fill the talent pipeline, loading docks and trucking companies are still fighting to fill positions. And with that, shippers may continue to face delays in...
Identifying Data Issues in Freight Procurement Operations
Due to the digital transformation push that stemmed from the COVID-19 pandemic, more freight procurement teams are using data than ever before. However, while many companies are boosting their efficiency and performance as a result of the data revolutions they have undertaken, many are still struggling to make the best use of all of this new data that they have at their fingertips. The good news is that many of these issues generally have easily addressable root causes. With that in mind, here are a few of the biggest issues that freight procurement teams tend to run into when it comes to driving data success. Transparency Transparency is “public enemy #1” when it comes to the issues shippers face when trying to leverage data and glean insights. Freight procurement is one of the most dynamic parts of the entire supply chain, so it is imperative that shippers have a 360-degree data view of the freight procurement landscape. However, with brokers and other third-party partners offering scant insights it is impossible for shippers to make sophisticated and agile decisions when it comes to sourcing carriers. Therefore, before doing anything else in terms of data ops, shippers need to find a way to generate the most transparent insights possible. A first step might be to ask your carrier providers to share 100% data transparency. Internal Infrastructure Although many shippers are working hard to become data-savvy, a vast majority are trying to do so with outdated on-premise infrastructure. This approach can have a myriad of consequences, but arguably the biggest one is that it significantly limits their ability to collaborate and have easy access...
Navigating 2022’s Early Capacity Woes
Access to capacity has been an ongoing challenge for freight procurement professionals for the last 24 months. And due to the continued fallout from the 2021 supply chain crisis and the circumstances stemming from Russia’s invasion of Ukraine, any hopes that a more stable capacity market may appear in 2022 have quickly evaporated among the freight procurement industry. That said, there are still steps that freight procurement professionals can take to ensure they are navigating this historically frenetic and tight freight capacity market. Prioritizing “Real-Time” The freight capacity market is not only strained but incredibly unpredictable, with sudden periods of capacity appearing at random. This means shippers need round-the-clock visibility in order to capitalize on any opportunities to take advantage of excess capacity and value. And thus, they need to trade in outdated tools that provide only a fragmented and static market view for those that deliver dynamic, real-time insights on supply and demand which feeds directly into truckload pricing. Move Away from Brokers The shipper-broker relationship has been tenuous for a long-time as is. However, as unprecedented freight market conditions continue to rumble on this relationship is likely to get more fraught. Brokers are renowned for high prices and a lack of transparency – two things that shippers can ill afford at the current moment. And as shipper budgets and margins become more strained, shippers will need to find ways to optimize each and every dollar in their transportation budget. Innovative shippers have already turned to automation technology that leverages AI/machine learning to source compliant, asset-based carriers directly and circumvent costly brokers and the spot market. Reinforces the Need for Digital Transformation...
Energy Price Hikes & Freight Procurement
With news that gas prices have officially hit the highest national average since 2008, shippers and their freight procurement teams are focused on what this could mean for their operations-- and their transportation budgets. Already coping with a historic supply chain snarl-up, the energy price surge could hardly come at a worse time for freight procurement professionals. Here are a few reasons why. Budgets Strain Even Further Transportation and logistics-related costs can account for roughly 10% of total COGS depending on the industry. Any upward movement with energy cost eats into a shipper's profit margin. With budgets already stretched razor-thin, many shippers have been forced to optimize their freight procurement process to help mitigate rising freight procurement costs. Freight procurement automation technology has helped shippers circumvent the costly broker market and move goods on time, at fair market pricing. Capacity Issues Deepen Because of these rising costs, many carriers are having to be more discerning about which routes they run, and how often they run them, in order to maximize their fuel budgets. This means that available capacity is going to become both tighter and more erratic, and shippers are going to have to rethink their logistics plans in tandem so that they can navigate these circumstances. Consumers Feel Price Hikes One of the hidden but arguably most negative impacts of energy price hikes is what it will mean for shippers and their customer relationships. Given how stretched budgets are already, very few shippers can afford to simply “eat” their rising procurement costs, and thus, have to pass these costs on to consumers – which is obviously not ideal, especially now. In addition, because of...