The New Normal in Transportation and Logistics
By Kevin Brink, ReTrans Freight
Most discussions about e-commerce hover around Amazon and its impact on the retail sector, but it’s also caused seismic ripples in the flow of transportation and logistics. The rapid growth of e-commerce is one of the reasons transportation capacity in the United States is so tight. There is not a lot of driver time or physical space on trucks available in the marketplace. Currently, most carriers are reporting an operation that is 96-97 percent full, or only having 3 to 4 percent of overall capacity available.
We all want our freight within a one or two-day window, but LTL, truckload, rail, ocean and intermodal carriers are not equipped to meet these demands like UPS, FedEx and USPS. All are accustomed to dock-to-dock, high-volume (tonnage) and low-frequency shipments. The development and demand of e-commerce has flipped that to low volume and high frequency, consuming more capacity across the board.
Compounding the issue is the continuously slow-burning but now blazing driver shortage, accompanied by a change in the way a driver's hours of service rules are enforced. Lenient ELD enforcement went into effect on December 18 (fines for non-compliance) with a hardline on April 1. Those not in compliance after the deadline will be removed from the road. ELDs have changed the equation and now time is the most important dynamic in today’s supply chain.
When talking about capacity, we usually talk about equipment and drivers, but rarely mention time. Because carriers need to be more productive with less time, they are placing a large emphasis on optimizing their networks and yield by using data, analytics and tools like dimensionalizers (automated systems that scan the weight and dimensions of freight in seconds, taking human error out of the equation). This tool set affords them the ability to determine whether they are accepting the right freight, in the right lane, at the right time. For the first time in many years, more freight isn’t better anymore, and carriers are less willing to take unprofitable freight in one lane just to balance it against another lane. This is where FE&S distributors, dealers and manufacturers need to work with one another to present a more attractive package for carriers to haul.
When thinking of the transportation of FE&S equipment, packaging is one of the first things that comes to mind. Damages are prevalent in the foodservice equipment industry, with the average claims ratio being 1.5 to 2 percent higher than the national average (based on data from the more than 230 dealers and manufacturers ReTrans Freight has partnered with). While an investment in packaging may erode slim margins, an investment in packaging and palletization of freight will cost less than absorbing significant pricing increases. It also will discourage carriers from opting not to pick up freight, which has happened recently with quite a few manufacturers.
Flexibility with pickup/delivery times at your facility, transmitting data electronically (increasing efficiencies by taking away a manual process for the carrier), paying on time and preassigning PRO#’s for carriers so they do not have to do it manually will speed up the entire process, creating time for the carrier.
The changes in transportation are coming and adaptation will be the marker of success. FE&S distributors and dealers can capitalize by aligning both traditional distribution models and e-commerce models with the needs and requirements of carriers in today’s marketplace.