Transportation in the Time of a Pandemic
In the wake of the COVID-19 pandemic, the long-haul transportation industry has been tested daily. The biggest issue? Fluctuations in supply and demand. Spot loads quadrupled in the last month with outbound tender volumes at their highest since 2018. In April, freight volumes increased from 100,000 loads per weekday to 150,000 loads at its peak, loads remained consistently above 130,000 each day early in the month. Volumes have since cooled; however, volatility prevails as manufacturing in China and the rest of Asia normalizing and we expect to see a surge of supply into the U.S. distribution networks later in 2020.
Although the pandemic amplified the presence of slack or waste in the system, volatility is not new to this market and it is not expected to change. Price and capacity volatility in this market are recurring themes, in late 2017, rates in the trucking industry skyrocketed, with trucking companies not being able to honor contractual rates/commitments resulting in a 30% increase in spot market prices.
2017 witnessed a perfect storm of factors contributing to volatility, exacerbating the ongoing driver shortage, DOT mandated new maximum hours of service (HoS) regulations monitored by ELD (Electronic Logging Devices), and hurricane relief efforts further tightened truck capacity. 2018 saw record levels of freight-hauling demand and driver-pay as tonnage levels reached a 20-year high. Some would argue that tighter capacity and inflated rates were an anomaly, others would consider it to be business as usual.
Volatility is the reality for this highly fragmented market. Shippers, brokers, carriers, and drivers have been slow to adopt enabling technology, perpetuating the lack of transparency and poor collaboration. This technology gap correlates with the prevalent waste in the system.
What is waste in the long-haul trucking industry?
The fundamental tenet of lean is removing any “non-value-adding waste from a process. The types of waste found in the trucking industry are waiting time, unnecessary movement, defects and non-utilized/empty miles.
Waiting: Referred to as detention time, it is defined as all the time drivers spend waiting for their trucks to be loaded and unloaded.
According to drivers, waiting at warehouses for shipments to load or unload is one of the most aggravating parts of their job. A 2018 study revealed that almost 63% of truck drivers experienced waiting times of at least three hours every time they arrived at a shipping dock. Drivers are typically not compensated for this non-value adding time, resulting in a 40% erosion of their earning hours for that day.
Unnecessary Movement: Non-revenue generating miles or empty miles equate to unnecessary movement – however, a truck domiciled in one state must return home with or without a return load. Having return loads are huge in this industry as it doubles the revenue generated by the asset.
Defects: Errors in the documentation and appointment scheduling result in idle time spent waiting for corrective action, e.g. re-printing / issue of documents, yard management or access and availability of resources and Material handling equipment for the off-loading or loading of trucks.
Non-utilized Talent: Utilizing resources to their full capacity is key to an optimized environment. The capacity constraints in the transportation market are defined by the truck capacity, miles traveled per day and hours of service available to a driver. Utilizing these three factors to their optimum is key to enabling the best revenue opportunity for drivers
It is no surprise that fluctuating capacity and cost are forcing the industry to adapt and change with the demands of our times. The players that survive and thrive through and after this pandemic will be the ones who embrace enabling technology.
Technology that unifies discrete elements of the shipping process
Digital freight networks
Digital freight networks offer open, fully connected freight marketplaces that use machine learning, automation, and other software services that connect shippers and carriers efficiently. A solution like SemiCab, which delivers a freight capacity optimization, creates net-new shared value by creating round trips that virtually eliminates empty miles from long-haul transportation. Today, 25% or more of the miles driven annually are empty, resulting in $100 billion of lost value. Enabling access to capacity for shippers – that would have been empty – at lower costs, results in conversion of empty miles into revenue generating miles.
The time to act is now
The extreme demand volatility we are experiencing amidst the Covid-19 pandemic may appear anomalous but historical data will prove that it is not an outlier. The volatility is characteristic of the transportation industry and it won’t fade away with the pandemic.
The American Transport Research Institute (ATRI) publish an annual report on the operational costs of trucking, in the 2018 report, ATRI found that trucking companies traveled over 9.4 billion miles in 2017 of which 20.7 percent were empty, at an operational cost of $1.69 per mile, that equates to $3.3 billion in empty miles traveled!
SemiCab is focused on eliminating waste from the industry by eliminating empty miles traveled, creating $50 billion in new economic value, eliminating the addition of 30 million metric tons of CO2 to the environment, and improving the quality of life for carriers and drivers. Leveraging their unique digital freight ecosystem, SemiCab will introduce total visibility into supply and demand and build fully loaded round trips, every time; reducing waiting time, eliminating empty miles, replacing archaic solutions, and letting drivers do what they do best, drive.
The benefits of a Digital Freight Ecosystem
The freight ecosystem will benefit from digitization as new technology enables them to optimize its supply chain. Using digital freight ecosystems, shippers and carriers will find their balance and eliminate empty miles from long haul transportation. Scalable prediction and optimization capabilities will improve the revenue generating miles traveled and will reduce the US Greenhouse gas emissions of which 28% – according to the EPA – are attributed to the transportation sector.
SemiCab offers a digital freight ecosystem using AI/ML predictions and proprietary optimization models, built with the scalability required to predict and optimize millions of fully loaded roundtrips. Leveraging network effects and advances in technology, unique distribution model reduces shipper freight costs by up to 10% and provides shippers with access to a large pool of carrier capacity who will be earning higher profits for the reduction of non-revenue generating miles.
ElMarie is an accomplished industry and supply chain leader with extensive experience in supply chain orchestration, contract logistics/3PL and 4PL. Prior to Blue Yonder, Elmarie was the Director of Supply Chain Excellence at Johnson Controls and held many leadership roles at DSV/UTi Integrated Logistics, and Barloworld Logistics. She has extensive experience working across multiple regions with Pharmaceutical, Automotive and Retail clients, supporting Manufacturers to define their Go to Market Strategies and advising both public and private sector how to secure product in market. Given her unique experience, she is well positioned to provide go-to market and thought leadership. She is focused on the 3PL, Distribution and Pharmaceutical / Life Sciences segments with a keen interest in Luminate Control Tower and the value this will unlock in Supply Chain Orchestration.