OK, so trucks didn’t exist 300 million years ago, the United States wasn't a country and although some would argue differently, American isn't a language. The idea; however, is still sound: it was much easier to move goods from point A to point B. As the geography changed, civilizations developed and nations grew apart. They developed trade routes to facilitate the exchange of goods. The roads were filled with caravans and the oceans were traversed by shipping vessels. This marked perhaps the most significant development and disruption in the history of the supply chain world: the emergence of the asset-based transportation provider.
Over the years, few technological advances were introduced unless hands were forced. Major advancements in the modern supply chain world (e.g., TMS platforms and API connectivity) have been catalyzed at the behest of non-asset-based freight forwarders and 3rd party logistics providers to manage the lack of sophistication among shippers. Issues arose when standards weren’t adopted. In a world where smartphones predict decisions before they’re made, why is it so difficult to find container availability around the world or demand plan for same day LTL pick-ups? Asset-based OTR, rail, ocean and air carriers have yet to adopt technology standards commensurate with the times. The supply chain landscape is fragmented and cumbersome. To compensate, third-party logistics providers and freight forwarders have developed technologies to provide greater value to the supply chain.
Anyone who’s moved a pallet from a factory in a land-locked country to their warehouse across the ocean understands the complexity. It begins with the supplier in Warsaw contacting the agent or office of a freight forwarder in Poland to contract a carrier for pick-up. There’s a high likelihood this carrier does not have a software system to manage the tender, documentation, dispatch, tracking and truck routing. So instead, swarms of phone calls and emails are traded before the shipment ever leaves the dock. Next, the freight transfers to a CFS station for consolidation with several other shipments into an ocean container. At this point, things get hairy. The container moves on the rail with very little, if any, technological connectivity between the shipper, the railroad and the ocean carrier that will be receiving it. This isn’t possible since the container itself has no technological tracking mechanism. The steamship line receiving the container has online tracking, but the container isn’t scanned like a UPS or FedEx package. Instead, it’s logged by a number painted on the side of the can and written on the BOL. The limited visibility provided by the carrier at this point is virtually eliminated until it reaches the Port of Savannah in the United States. The steamship signals prior to arriving in port. This is done through limited, outdated technology. The customs broker is sent the documentation manually using a very ancient communication technique that is still heavily employed: e-mail. The port unloads the steamship and the container moves by rail to Memphis for deconsolidation and customs clearance. An LTL carrier then picks up the pallet and delivers it to the warehouse in Jonesboro. This all occurs with very little to no automated communication, document transfer or tracking. Despite this, international and domestic non-asset providers have been successful in linking together these processes and capitalizing on the opportunity. This has greatly supported their sales and operations teams to achieve massive growth.
Considering smartphones have the ability to learn habits and implement adjustments to make daily routines easier, what was just described can be equated to putting this paper on a floppy disk, driving it across the country (no GPS allowed, so paper maps are necessary) and handing it to the publisher. Semi-fortunately, in the U.S., domestic trucking, airfreight and, in a very limited capacity, ocean freight industries EDI is widely accepted. EDI, however, is akin to putting this paper on a USB drive and mailing it (non-priority and without a tracking number) to the publisher. Granted, the smartphone industry has had far more investment than supply chain software and technology. The fact still remains; however, that the logistics sector has fallen behind the times.
Industry veterans familiar with the domestic and international logistics arena already know that many carriers blame forwarders, 3PLs and other non-asset providers for their lower margins. They argue that aggressive negotiation tactics, online TMS platforms and aggressive sales forces devastated profit levels. The simple truth is that these tech-heavy, non-asset providers seized the opportunity to push the industry towards a logistical Pangaea while both international and domestic carriers failed to adapt to the impending change. Few providers failed to devise engagement plans specific to their asset-less counterparts to improve margin and service offering.
For what it’s worth, there’s quite a few parallel themes between the international market and the U.S. domestic market. Limited ability for same-day demand planning based on ocean container capacity constraints is a challenge not unfamiliar to the domestic truckload market. Tracking ocean freight based on numbers painted on the container is really just a more permanent version of a PRO# license plate.
Let’s take a moment to let this sink in because it’s important to understand that this article isn’t championing anyone. It simply states the hard and fast truth that exists in today’s transportation market: there is in fact a need for these tech-laden companies to bridge the geo-logistical divides that exist in our industry. Imagine the impact on same-day demand planning if LTL carriers adapted technology to pinpoint the exact cube/weight capacity remaining in pick-up trailers. Carriers could instantly rearrange their routes to not only optimize efficiency but also provide a better product to shippers. Nonetheless, the industry’s need for these technology-based, logistical conduits wouldn’t change because there isn’t a single asset-based provider in the entire world that can easily automate and facilitate international shipments. And someday if that provider does exist, it will be nothing more than a hybrid of what today is known as a carrier and a forwarder. An asset- and non-asset-based company combined.
For the time being it needs to be understood that these technology companies playing in the logistics and transportation arena so many consider evil are very necessary. That does not make them a necessary evil because the industry needs what they bring to the table. Freight forwarders and 3PLs have become the glue that holds the pieces of the supply chain together. C.H. Robinson, Coyote Logistics and Expeditors are just a few examples of household names in the supply chain industry whose growth has been fueled by the utilization of technology to fuse the disjointed parts of the freight process. Until a complete hybrid solution exists, standards need to be established utilizing modern technology developments. It’s time to invest time and money to design connectivity where geographic restrictions call for multiple modes of transportation. Those that don’t will quickly be eclipsed by their competitors who choose to do so. There are many logistics companies that have begun to do this on behalf of their shippers to mask the disjointedness. It’s time all parties come to the table to eliminate it and build the geo-logistical Pangaea.
Erik Malin is Director of Strategy and Kevin Coomes is Director of International Services at CarrierDirect.
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