In today’s volatile supply chain, shipments rarely move from Point A to Point B without encountering delays and an array of hiccups along the way. This makes having advanced supply chain visibility and control more important than ever.
The practice of logistics has long involved management by exception. But with all of today’s problems associated with port congestion, drayage delays, and worker shortages, it seems like the exceptions are becoming the rule.
Indeed, transportation costs increased 22% while inventory-carrying costs increased almost 26% in 2021 compared to 2020, according to CSCMP’s annual State of Logistics report.
Furthermore, according to U.S. Census data, e-commerce retail sales, not adjusted, for Q1 2022 were 58% higher than Q1 2020. This strong growth has contributed to the increased number of shipments in the marketplace and has further constrained already-tight trucking capacity.
Digital logistics technologies are playing an increasingly important role in exceptions management. Systems can now capture a plethora of data, and by applying that data using machine learning algorithms, they can automatically flag potential problems, helping logistics managers focus their attentions where they need to be.
However, most logistics technology providers direct their efforts and innovations toward the large enterprise market, which represents a relatively small group of shippers with substantial technology budgets to spend on these high-cost systems. That leaves most shippers — a much larger group of small and midsized companies — out in the cold and at a competitive disadvantage.
According to the Office of the U.S. Trade Representative, there are 30 million small and medium-sized businesses (SMBs) in the U.S., which accounts for almost two-thirds of net new private sector jobs.
Why do tech companies ignore small and midsized shippers? Large shippers represent a small cohort of companies whose transportation issues have more in common with each other than with SMBs — a large, diverse, and fragmented market segment. It’s easier for the tech companies to allocate their resources toward solving the more homogeneous problems of the larger players, and much more difficult to solve the array of issues presented by smaller companies.
As a result, SMBs are underserved in the logistics technology marketplace and tend to rely on low-tech solutions to manage their operations. That often means spending lots of time on the phone trying to hustle up truck space. For obvious reasons, that’s an increasingly difficult and inefficient process.
All of this, plus the fact that SMBs spend an aggregate of around $32 billion a year on freight, suggests that the small to midsized shipper segment is ripe for opportunity and disruption. The marketplace appears to be recognizing this situation, as evidenced by the introduction of new transportation management systems (TMS) that set out to address the needs of SMBs and that could serve to level the playing field with their larger competitors.
These new TMS feature automated, easy-to-use, self-service tools that allow SMBs to find capacity and book freight. And, importantly, they are free or nearly free to acquire.
What benefits can SMBs expect from these systems? At a basic level, these new digital platforms serve as online freight marketplaces that automate and streamline the transportation procurement process, by incorporating pre-build integrations with strategic platforms, eliminating the need for manual searches, data entry and the use of the telephone. Utilizing artificial intelligence (AI), the platforms can quickly and efficiently match loads with available capacity. They can also provide instant quoting by quickly processing current and historical rate data. Booking capabilities can also be automated.
As a result, shippers gain greater visibility into capacity in specific markets and lanes, along with important carrier information such as available equipment, past histories and other service details. Near real-time visibility into market conditions, along with open and matched loads, help shippers to better address issues of supply and demand as well as day-to-day fluctuations in pricing. Some platforms also provide a central repository for a company’s logistics and supply chain data, allowing for more robust analytics tailored towards a customer’s needs.
On a more sophisticated level, this new breed of TMS provides small and midsized shippers with the capability to aggregate the capacity of smaller carriers, allowing them to function as virtual networks. In effect, this capability provides SMB shippers with the scale and flexibility enjoyed by large shippers that are able to tap into the resources of the big carriers.
By coalescing groups of carriers that serve their needs into a virtual network, shippers can ensure that capacity is available when and where they need it and acquire reliable coverage — with the right service levels and the right carriers — for their shipments. With the automated tools and business intelligence (BI) reporting that these systems provide, SMB shippers are better able to measure performance and to optimize supply chain decision making.
The effects of reducing transportation costs, creating more efficient supply chains, optimizing logistics operations, and providing greater shipping data visibility can impact a company’s top and bottom lines. In the case of one retailer, making these improvements allowed that company to increase its digital sales by 50% and its same-store sales by 9%.
The automated tools provided by this new breed of TMS, and the coalescing of capacity in virtual networks, allow SMB shippers to make better use of the capacities of smaller trucking companies — the 97% of carriers that own 20 or fewer trucks. The automated intelligent load-matching features and complex network optimization of capacity also benefit these smaller carriers, allowing them to book more loads, serving them up the next best load on the fly, keeping utilization of assets at a high level, and eliminating empty miles. It’s a win-win for shippers and carriers alike.
Capacity shortages and surging e-commerce volumes are unlikely to go away anytime soon. While there are some green shoots appearing in supply chains, disruptions can happen quickly.
By utilizing this new breed of digital logistics platforms, smaller organizations can address short-term capacity needs while expanding and diversifying carrier networks to better position themselves for whatever future market conditions may bring.
Small and midsized shippers will soon come to realize the benefits of the technology and data-driven insights that these new platforms provide. Besides reducing or eliminating manual logistics management work and creating a centralized place to store information, these systems allow users to derive insights about their businesses that they never had access to before, and to generate long-term visions for the future growth of their companies that they never before imagined.
Brian Work is chief technology officer of Transportation Insight.
Timely, incisive articles delivered directly to your inbox.