Any logistics professional knows that freight rates jump up and down as supply and demand for over-the-road capacity fluctuates. Maintaining fair truckload cost, while delivering goods on time, has always been one of the biggest struggles for transportation teams, especially when disruption occurs.
US truckload rates have decreased some 10% (brokerage and contract blend) YoY, and they continue to ease back towards normal after an unpredictable couple of years. Many analysts expect freight rates to continue to drop into next year. But all it takes is one major disruption. For example, the rail strike could have been devastating for shippers. If the strike had occurred, on a daily basis more than 50,000 intermodal loads would have been converted to over-the-road. This would have caused truckload rates to increase by two to three times depending on the origins and destination. That said, shippers are still facing other perils, such as inflation. This makes finding the optimal shipping method more important than ever, or at minimum finding a contingency plan or safety net.
Unfortunately, many large shippers learned the hard way and finally realized that traditional freight procurement processes can not keep up with disruption. For example, the RFP process locks in freight rates with contracted carriers, and only provides peace of mind that loads will be accepted and delivered on time when the freight market is soft and the shipper is over-paying the contracted carrier. When the market tightens, when disruption occurs, contracted carriers decline contracted rates in lieu of more lucrative business leaving the shipper to scramble to find another truck, or ante up and pay more.
Forward-thinking shippers have reimagined how to source carriers. They have supplemented RFPs, and brokers, with AI-powered technology that dynamically matches loads to the right carrier, at the right time, and at the right price. By doing so, they have reduced truckload cost by 15-20%, while strengthening on-time delivery (OTD) to 98%+. Shippers who continue to rely on static workflows, don’t have control over cost and service, which means they can’t effectively manage another major disruption.
AI/ML-powered automation technology is the only known freight procurement solution that can effectively manage truckload cost, and service, during a major event. Automation dynamically matches shippers’ load attributes to compliant carriers dynamically so shipments are moved on time, and at fair market price. By supplementing contracted carriers and brokers with automation, the carrier market dictates the price of a load, as carriers bid on loads directly. Real-time bidding keeps truckload pricing aligned with current market conditions. With inflation and other factors still playing a heavy role in how business is done, getting the most cost-efficient carrier (at the right time, place, and price) helps shippers mitigate rising costs and poor service levels.
There are still plenty of hurdles to overcome in the global supply chain, but it appears some of the volatility is starting to recede. So before the next big event occurs, shippers should be finalizing a strong contingency plan (or safety net), which means they should be considering how to implement automation technology that will make them more agile.