AT Kearney39s Sean Monahan left confers with Penske Logistics39 Marc Althen about the findings from this year39s State of Logistics report Photo Sean KilcarrAmerican Trucker

A.T. Kearney's Sean Monahan (left) confers with Penske Logistics' Marc Althen about the findings from this year's State of Logistics report. (Photo: Sean Kilcarr/American Trucker)

The logistics trends that will impact trucking

Annual State of Logistics report points to challenges and opportunities ahead for smaller-sized operations.

Small fleets and owner-operators take heart; though a lot of change is poised to occur in the logistics world of today and tomorrow, opportunities for growth and profits should develop as well – if the challenges posed by those changes can be surmounted, of course.

That’s the crux of what came out of the unveiling of the annual State of Logistics report this week – a report compiled by consulting firm A.T. Kearney with the help of the Council of Supply Chain Management Professionals (CSCMP) and Penske Logistics – as well as the panel discussion that followed during a press event in Washington D.C. this week.

The 28th iteration of this report analyzed multiple trends that are affecting every mode of freight transportation in the U.S. as well as broader economic shifts as well.

“At the midpoint of 2017, we see a backdrop of economic and political uncertainty,” noted Sean Monahan, a partner with A.T. Kearney and the lead author of the report.

“An array of mixed signals vexes decision-makers, who see consumer confidence rise while GDP [gross domestic product] growth disappoints, and government officials struggle to take clear action related to stimulating growth, addressing infrastructure requirements, and trade policy,” he explained.

Near-term GDP growth in the U.S., while predicted to be strong, isn’t projected to go any higher than 2.5% over the next three years. That’s not great news for truckers as the report indicated truckload and intermodal segments finished 2016 weak, while the LTL segment managed to push through moderate rate increases even as volume declines depressed overall revenues.

By contrast, though, dedicated contract carriage (DCC) and brokerage services were industry “bright spots” where “new business models” are taking shape.

Still, the advent of new technologies is changing the freight game in ways that may ultimately help smaller trucking players get access to more cargoes at better prices.

“Big data and advanced analytics … quickly assess capacity across vast carrier networks, forecast demand and pricing more accurately, and offer fixed rates to primary [motor] carriers on key lanes,” the report noted. Such systems “benefit carriers and shippers alike,” helping carriers find cargo for “interhaul” segments between contracted loads, when trailers often run empty.

“Advanced brokerage capabilities open the door to new sources of capacity, helping smaller carriers that lack the scale and capabilities to work directly with major shippers,” the report indicated. “More-recent technological innovations include mobile platforms that enable brokers to efficiently match trucks with loads.”

A few other trucking-focused findings from this year’s report include:

  • Initial predictions that ELDs would reduce available capacity by 3% to 10% appear to have overstated the amount of “cheating” going on under the old manual hours-of-service tracking regime. The capacity impact is probably in the 2% to 3% range.
  • More shippers are embracing DCC arrangements that lock in capacity, rates, and service levels. Yet they are also tasking their trucking partners to find backhauls and share revenues in such arrangements now.
  • E-commerce retailers are winning customers away from traditional brick-and-mortar stores by promising fast and free delivery to innumerable locations across the country. To fulfill this promise without crushing profit margins, they are looking to reduce shipping costs and reconfigure distribution networks.
  • Regionally oriented distribution centers have emerged as linchpins of advanced networks as retailers offering same-day delivery move goods closer to densely populated areas.
  • Those redesigned distribution networks require new trucking routes, with motor carriers shifting line-haul routes to transport merchandise from national distribution centers and rebalance volumes between local and regional centers.
  • Last-mile capabilities are essential to same-day delivery and motor carriers will continue striving to build the local route densities necessary to provide last-mile services profitably.
  • Connected vehicles and “Uberization” have the greatest near-term disruptive potential. Yet some shippers and motor carriers are reluctant to adapt Uber’s ride-sharing model for moving millions of dollars’ worth of freight as that requires higher levels of planning, qualification, and service than ferrying passengers across town.
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