Nearly every shipper has been impacted in 2020 in one way or another. Some, like those dealing in essential goods, have seen business boom. Others have been forced to sit idly by hoping the economy turns around and their goods are suddenly in demand again.
Whichever end of the spectrum you sit on, there is one thing that defines 2020: unpredictability.
The COVID-19 pandemic has brought great uncertainty to the freight markets, with some companies thriving and others struggling. An IBM Institute for Business Value (IBV) study, “COVID-19 and the Future of Business,” found that 62% of C-suite respondents expect to focus on supply chain resiliency and digitization moving forward.
“Leaders are expecting more from their transformation initiatives,” the report noted. “They identify competitiveness and workforce resilience as the benefits they most want from ongoing digital transformation. Transformation is also accelerating among a majority of organizations. But strikingly, greater focus on transformation seems to be at the expense of customer relationships and partnering opportunities.”
By 2022, 94% of executives surveyed plan to participate in a platform-based business model with increased participation in ecosystems and partner networks.
As the freight markets head into peak season, shippers are quickly learning they lack the visibility and technological prowess necessary to ensure a smooth supply chain.
When COVID-19 shut down wide swaths of the U.S. economy earlier this year, few could have predicted the resulting rate uncertainty ahead. Many predicted collapsing rates as businesses shut down and volumes dried up – but that didn’t happen. Instead, rates – both spot and contract – have been on a steady rise, along with volumes.
As the fourth quarter kicked off on Oct. 1, rates were up 28% year-over-year, according to FreightWaves’ SONAR data. SONAR’s Outbound Tender Volume Index (SONAR: OTVI.USA) was at 15,691.73 as of Oct. 1, up from 10,553 on Oct. 1, 2019. Accepted freight tender volumes were up 16.5% year-over-year while retail inventories are down 12% year-over-year. Retail sales have climbed 11%.
Andrew Cox, market analyst for FreightWaves, recently wrote that carriers maintain a decided edge in negotiating rates with shippers, with the three-month DHL Supply Chain Pricing Power Index showing a reading of 85. Any reading above 50 indicates carriers have pricing leverage. The index uses analytics and data within FreightWaves’ SONAR platform to determine whether shippers or carriers have negotiating power.
And all of this is before a potential second round of stimulus payments, which could further juice the economic recovery.
“Our expectations have not changed in recent weeks, and we still believe the rest of the year is bright for the freight market. …. While consumer confidence has faltered, spending is remaining strong given the economic backdrop. These factors lead us to believe that freight volumes could end with a massive bang,” Cox wrote.
Backing up Cox’s thoughts is a recent report from investment bank Jeffries.
“We are just at the beginning of what is likely to be one of the biggest restocking cycles — if not the biggest inventory restocking cycle — in U.S. history,” Jefferies Chief Economist Aneta Markowska said. “What’s behind this is one of the biggest post-recession recoveries in the goods economy, including consumer goods as well as housing.”
Markowska added that the goods economy has performed so well that many retailers and suppliers were caught off guard.
“Nobody anticipated demand to be this strong this quickly. As a result, we have inventory-to-sales ratios today that are at absolute record lows,” she said.
The right technology needs to be in place
While few could have foreseen what has happened in 2020, the reality is many shippers are just trying to survive. The reason? They lack the necessary visibility into their logistics operations to quickly adapt.
With all the uncertainty moving forward, shippers are increasingly looking for solutions that can help. That means deploying the right technology that can provide near real-time insights and context around what is occurring in the supply chain.
Some transportation management system (TMS) providers are quite capable of deploying technology that can help shippers. A modern TMS has a great deal of functionality, but how useful it is depends on which functionality shippers turn on — and how it is used. Without understanding what functionality is available, and most importantly what is needed for their unique business, shippers are left with a technology solution that can disappoint.
In the current marketplace, the wrong solution leads to a lack of supply chain insight that leaves shippers unable to respond quickly enough to the changes taking place. Earlier this year, Andy Schmahl, partner and managing director of the Boston Consulting Group, said shippers need to consider how they will use the tools they have at their disposal.
“Do we want to use [these] as a strategic weapon? That may lead you to a company that understands the transportation market really well,” he said. “Or do you want to use [these] as a cost weapon? You have to start with some of these more basic questions.”
The right technology partner is important
Equally as important as the technology is the right technology partner. nVision Global offers its Impact TMS for those looking for a TMS solution, but the company provides much more than just basic technology.
The Impact TMS offers shippers an end-to-end option that can handle everything from inbound purchase orders to outbound shipment execution and self-invoicing. It can handle vendor compliance through the order book, contractual term compliance and benchmarking, auto rating, tendering, exception management, tender rejections, spot auctioning, and freight approval.
Within the business intelligence tool, the system confirms the load was picked up and analyzes the load cost by lane to ensure shippers are paying the lowest possible rate. nVision is also able to assist shippers to negotiate lower rates by using its scale and connections with thousands of less-than-truckload and truckload providers to find alternative solutions. nVision also has access to thousands of rate-related data points that allow it to benchmark one shipper’s rates against industry averages, highlighting wasted transportation spend.
Freight bill auditing and payment, claims management, rate negotiations, benchmarking and procurement are other services the right technology partner can provide that go beyond simply supplying a TMS. Not all shippers need this level of service, of course, but not all technology providers can offer it. In volatile times such as these, and with a high level of uncertainty moving forward, it pays to partner with a company that has the insights and technology solutions necessary to achieve the desired results.