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By offering supply chain optimization and better use of data, managed transportation providers continue growth trajectory

Shippers responded to tight capacity and high rates in 2018 by turning to managed transportation providers, and if the predictions for 2019 come true, they will likely continue down this path. ( Photo: Shutterstock )

Most shippers faced high rates and capacity squeezes in 2018. FTR Transportation Intelligence reports that truck utilization reached 100% in 2018, with only a slight dip coming this year. Add in a lack of drivers, and 2019 may look very similar to 2018 for shippers – continued rate hikes and trouble finding truck capacity.

“One thing we have seen recently is that the [freight] surge that had taken place through almost all of 2017 and well into 2018 has begun to flatten out a bit,” explained Avery Vise, vice president of trucking for FTR, during a recent State of Freight webinar. “As we look forward, we anticipate that same type of trend. We certainly are not seeing the same level of growth that we saw before, but we are still seeing growth.”

Donald Broughton, FreightWaves’ chief market strategist and founder of Broughton Capital, predicts that demand will continue to exceed capacity in 2019, leading to continued rate increases.

“Growth at the rate achieved in 2018, especially the rate achieved in the first half of 2018, seems unrealistic, but sustained growth is the most likely scenario,” he wrote. “The longer freight flows and all the various modes continue to grow, the more our confidence in this outlook grows.”

Shippers responded in 2018 by turning to managed transportation providers, and if the predictions for 2019 come true, they will likely continue down this path. The global third-party (3PL) logistics market is estimated to have a compounded annual growth rate of about 9 percent through 2028. It was $865 billion in 2018.

Shippers continue to find value in 3PLs, or managed transportation providers, which also can include 4PLs. The 2019 Third-Party Logistics Study: State of Logistics Outsourcing Report, produced by Penske Logistics along with Penn State University, Infosys and Korn Ferry, found that 89 percent of shippers and 98 percent of 3PL providers agreed that the use of 3PLs has contributed to improving customer service. Additionally, 73 percent of 3PL users and 91 percent of 3PL providers agreed that 3PLs offer new and innovative ways to improve logistics effectiveness.

It is this point that Ross Spanier, senior vice president, sales & managed solutions for GlobalTranz, says is a primary reason behind the growing popularity of managed transportation service providers.

“Our customers’ businesses are rapidly evolving, and they understand it is more profitable for them to focus on their core competencies, rather than on the day-to-day details of their transportation and logistics,” Spanier says. “The market will continue to evolve as consumer demands change, and this will place ever greater pressure on shippers’ supply chains. In addition, in this industry there are a variety of disruptive factors, including the effects of tariffs and trade disputes, the continued shortage of qualified truck drivers, which limits available capacity, and weather events. It’s critical that shippers have a trusted partner that can help them navigate these challenges.” The 3PL survey found that 77 percent of respondents cited increased transportation and logistics costs as the biggest disruptor to their business, with logistics network disruptions the second most, named by 76 percent.

While the tight capacity and high rate environment of 2018 likely led some shippers to seek out managed transportation providers hoping to secure capacity and better rates, Spanier notes that it is the other services 3PLs provide that offer the true value. These services can include network analysis, optimization, and simply providing more proactive customer service.

“Rather than simply looking to reduce rates on individual lanes, we take a more holistic look at our customer’s overall approach to transportation and logistics. Through our network of carriers, we are often able to negotiate lower rates on behalf of our customers. But we also focus on leveraging the data GTZmanage™, our Transportation Management System (TMS), collects so that we can help our customers create efficiencies, make better-informed real-time business decisions, and achieve an operative and competitive advantage,” Spanier says. “Our customers’ need to save money is a given. And of course, it’s an important part of any solution. But to unlock lasting value, it takes technology, analytics, and expertise to create an environment in which the business is using data to drive their success.”

The State of Logistics survey backs up Spanier’s point, with 81 percent of respondents saying they turned to a 3PL for domestic transportation, but international transportation services (71 percent), warehousing (69 percent), freight forwarding (50 percent) and customs brokerage (40 percent) are also popular services shippers are seeking.

On the data side, 61 percent of shippers and 54 percent of 3PLs believe the smooth transfer of information is vital to ensuring a positive customer experience.

“In terms of executive conversation, the supply chain has moved from the back room to the boardroom, and shippers are seeking logistics partners that are capable of doing more than simply moving shipments from Point A to Point B,” Spanier says.

To minimize disruptions and to maximize efficiency, both shippers and 3PLs have increasingly turned to technology for supply chain visibility. In the study, the majority of shippers—93 percent—agreed that IT capabilities are a necessary element of 3PL expertise, and 55 percent of shippers agreed they are satisfied with 3PL IT capabilities.

Spanier also notes that as the “Amazon effect” drives expectations for faster and cheaper deliveries while increasing the complexity of supply chains, more shippers are seeking the assistance of managed transportation providers.

“We provide a control tower for decision-making and that goes beyond simply putting freight on a digital load board. We take the time to understand our customers’ priorities in order to move their freight in the most efficient way possible,” he points out. “Our best customers are very transparent in the discovery process and that allows us to make better decisions on their behalf.”

Spanier says that managed transportation providers today are also offering more consultative services to help shippers take on more complex supply chain and logistics challenges.

“It’s become a requirement that managed transportation providers go beyond transportation to take a more consultative approach,” he says. “Shippers are asking, ‘How can I leverage data and predictive analytics to anticipate market volatility, to inform my buying patterns, and streamline my warehouse operations?’ Only a provider with truly consultative approach can help tackle those challenges.”

As capacity continues to tighten, rates continue to rise, and managed transportation providers expand their service offerings, more shippers are turning to outside help to manage their supply chain, and there appears to be no change in that trend in the near future.

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Brian Straight

Brian Straight covers general transportation news and leads the editorial team as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and fleetowner.com. Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler.