NEWS & UPDATES
Is Technology the Solution to Spiking Truckload Demand?
Written by The Emerge Editorial Staff
25 March 2020
The Problem At Hand
In our first blog post since the Coronavirus pandemic, we discussed how volumes and shifts in capacity are taking shape within the domestic trucking markets, which will have rippling effects on shippers’ supply chains. As described in Supply Chain Dive, “demand is spiking for inland trucking capacity as grocers and retailers look to restock their shelves with critical goods amid the COVID-19 outbreak.” Companies’ urgency, responsiveness, and adaptability to the issue at-hand will ultimately determine how successful they are in managing through such a crisis.
Most shippers run 90% of their domestic truckload via contracts, usually administering RFPs annually to lock in carriers and brokers on lanes. Consequently, 10% of their freight is moved through the spot market, which is variable pricing based on current market conditions. As volumes fluctuate during this crisis, shippers will be subjected to more of their freight hitting the spot market, thus increasing cost.
As volumes fluctuate during this crisis, shippers will be subjected to more of their freight hitting the spot market, thus increasing cost.
What We’ve Learned
In 2018, we experienced extreme spot market volatility due to increases in e-commerce, surges in inventory from legislative tax cuts, ELD regulations, and the fear of impending tariffs on goods from China. This led to a decline in primary acceptance and route guide non-compliance, and in turn caused spikes in spot market pricing. The companies that managed effectively through that period of time utilized technology and ultimately broadened their reach on capacity to mitigate their risk of skyrocketing freight cost.
To compound the issue facing the industry, truckload procurement is usually managed on spreadsheets via email and phone calls, with little emphasis on visibility and organization. Most small to midsize shippers rely 100% on the spot market utilizing email blasts to their carrier and broker partners at the time of sourcing capacity. Most large shippers limit their carrier stable to 20-30 total capacity providers. FreightWaves reports that, “shippers feel they cannot move freight fast enough, and for many of them the high spot rate markets are the only option.” These methods have to be revisited in turbulent times, and automation is at the forefront of the solution.
“As volumes fluctuate during this crisis, shippers will be subjected to more of their freight hitting the spot market, thus increasing cost.”
Many of the freight tech companies are offering consultations to showcase their platforms and identify how they can provide tools to help shippers control their capacity needs through 2020.
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