There’s a hurdle in the road to recovery that the shipper community is still trying to overcome.
Analysts forecast the economy to grow dramatically in 2021’s second and third quarters. Consumerism is rising, domestic manufacturers have ramped up output and ports on both coasts can’t keep up with swelling backlogs and imports. All this growth has caused a perfect storm where demand for trucking services is well outpacing capacity.
Shippers are trying to come to grips with this reality and are forced to ask themselves “Will there be enough trucking capacity to ultimately get my goods to market?”
It’s a hurdle most shippers have never faced before.
For shippers who’ve already weathered everything that’s been thrown at them since early 2020, it can be distressing. We’re seemingly at an inflection point with public health and economic growth, yet shippers may not have the transportation available, especially at a reasonable cost, to actually reach their customers.
Less-than-truckload (LTL) carriers are already running at capacity. They’re maxed out. As a recent Journal of Commerce article stated, “everybody is slammed.”
This undoubtedly will translate to higher prices for shippers.
Just like seen with parcel carriers over the past year, LTL carriers likely will shy away from growing capacity. Instead, they’ll focus on boosting margins on the capacity they already have. Adding capacity is costly and mostly unrealistic right now. Truck backorders have mounted, with build slots nine months to a year out. And, drivers might be harder to come by than trucks, especially for service-focused LTL fleets. Plus, adding capacity in ongoing market tumult is a risky endeavor.
Instead, LTL carriers are adjusting their rates and asking shippers to pay more. LTL carriers will also likely pull out of lanes they no longer want to service and focus on the lanes they like or are most profitable for them.
For buyers of LTL service, this means you have to be more dynamic and more nimble in the way you work with your carriers.
So, how can shippers overcome LTL capacity shortages? Upgrading their technology to a dynamic transportation management system (TMS) that maximizes LTL options is one of the most actionable ways that shippers can manage their LTL transportation and work more efficiently with their carrier base.
Automatic rates shopping and mode optimization
The beauty of a TMS is that it centralizes your rating into one platform where you can connect to your carriers, load boards, rate indexes and more to maximize number of contracted and spot rates.
In the coming months and years, shippers will need this functionality more than ever. Shippers want to rely on a TMS that does the rate shopping for them by finding the best transportation service at the best rates on the lanes they need. Every carrier is going to price lanes differently, and you want to use the right carrier in every lane for every shipment.
Also, as rates continue to climb in the coming months, shippers need a system that helps them shift modes, such as transitioning LTL shipments into multi-stop truckload, for example.
The right TMS can handle all of those needs. Rate, route and mode optimization — functions that used to be reserved for highly skilled engineers — are now available to nearly any route planner and logistics manager.
Simplifying the complex
Supply chains and freight transportation management have become immensely complex. Shippers need simpler. They need ease of use. They need something that takes the complexity and synthesizes it.
A dynamic TMS can do that.
Simpler doesn’t mean less functionality. It means software that’s easier to use, that takes care of shippers’ needs in a digestible way.
Technology that just a few short years ago seemed reserved for mega-shippers with IT and transportation budgets of hundreds of millions of dollars now makes sense for nearly all shippers, even those who spend as little as $10 million a year on LTL or truckload transportation service. The right TMS takes the burden off internal logistics managers and lets them focus on what matters most — the art of delivery.
Providing needed competitive tools
LTL and truckload carriers alike have invested billions collectively over the past half-decade in software that helps them calculate rates in real-time, so they can increase prices quickly on a lane-by-lane basis to maximize their margins.
Shippers can’t afford not to keep up with those investments and the investments of their shipper peers, especially their competitors. It could mean the difference between riding the coming wave of growth into a more profitable tomorrow, or being left to continually struggle finding affordable trucking options.
Adoption is simpler than it’s ever been
If you’re not using a dynamic, cloud-based TMS, now’s the time to start investing in one. Modern suppliers leverage cloud software and simple templated installs, and can get your system up and operational in just a few weeks.
Shippers that fail to digitize their transportation sourcing and management simply won’t keep up in the world of today, and more importantly, in the fast-approaching world of tomorrow.