Transportation Providers are not All Happy About Visibility
At a recent CSCMP meeting, I attended a session of transportation providers called “Supply Chain Visibility and the Possible Legal Implications” – and the participants shared some insights into their serious concerns about the implications of visibility in the transport world.
In transportation, people want to be able to see the loads on trucks, but the speakers at this session pointed out that sometimes people forget about what might happen when everyone can see the information. A three person panel, including Prasad Collapali from Trucker Tools. Jason Beardall, from England Logistics, Tamara Goorevitz, a lawyer who deals with lawsuits and litigation around transportation, shared insights into this issue.
Prasad Collapalli began by discussing how the tracking and monitoring of freight and assets to optimize asset utilization and operations is typically viewed as a great tool to have. In addition the goal of using visibility tools is to identify exceptions and delays. Asset utilization includes trucks, and resources, and operational optimization of these assets is key. Note that the goal of visibility is NOT to monitor where the trucker stops, etc…but should just be about tracking freight. Real-time accurate tracking and monitoring is key to establishing the right level of visibility, to see what is happening and when, and this can only come when there is real-time (every second) freight time monitoring. A 5 mile radius tracking doesn’t help you monitor freight. If you go through Atlanta, it could take you five hours to go five miles. Accuracy of information will become key to improve operations and information.
Amazon has taught us that everyone who has Amazon Prime account now expects two day shipping! Amazon NOW is a new offering that promises 3 hour delivery from point of purchase, and this is being tested in large markets. The NOW approach redefines the way that logistics is set up, with more DC’s which are closer together, and knowing spending habits, how quickly they are buying, and having product stocked in the market. Prasad notes that “we had four offices in China and we met up with the Ministry of Transportation, and went into their war room. We were amazed to see that the MoT monitors EVERY truck in the country in real-time, and each is being tracked. They could push a button and put a carrier out of business for a hazmat load that is out of compliance!”
“This is not the case in Western markets, as we are a market based on capitalism, so the visibility technology has to be adopted, and one could argue that it is evolving. A big problem is that the average profitability for OTR truckers used to be in the range of 6-9 points, but we are now down 3 points to around 6-9 points. Shippers are looking for extended payment terms! The 3PL world is trying to relieve the tension that is mounting between shippers and carriers, and seeking to create extended pricing commitments that can lock down terms. Shippers want two year pricing commitments, but their attitude is “if the market shifts in our favor, we will revisit the agreement – but if it goes in the other direction we will hold you to the terms! A big problem has to do with the nature of unpredictability in this market, whereas in the past shippers could predict rates, produce levels were predictable, and business was good. In today’s market we don’t know what will happen next week! So committing to 12 – 24 months rates has created tension in carrier/3PL relationships. Shippers are coming to realization that they see the value in long-term contracts, but there is a requirement to bid to the market, extend payables, and increase fineds for loads not tracked. Everyone is feeling the pressure.
Jason Beardley pointed out that tracking of shipments is being used against carriers. The technology is moving in the direction where a shipper will require the carrier or broker to contractually agree that product rejection is not subject to the confirmation by a a desired individual. So technology will be important here, as there was be a lower need to check calls, improve optimization of routes, and reduce waste in miles and freight. Market visibility will be key, as real-time visibility can result in fewer empty miles and greater productivity. The benefits will accrue as follows:
- 3PL’s – fewer check calls, greater productivity, streamlined bill of lading and back office operations, reduced rates, market visibility.
- Shipper – reduced cost of transportation, better load planning and dock management, greater market visibility and predictability.
In our next post, we discuss how the benefits have to be tempered against the risks of having complete visibility.