Last month, I had the opportunity to speak at CLX Logistics’ 6th Annual Customer Conference in Philadelphia. The theme of this year’s conference was “The Transportation Revolution: In It Together” — an appropriate theme considering all of the forces impacting the transportation industry today (everything from new technologies to new regulations to ever-present challenges such as driver shortage) and how shippers, logistics service providers, and consignees need to work more collaboratively together to succeed.
Mark Chrencik, Director of Operations at CLX Logistics (a Talking Logistics sponsor), kicked off the conference with a market update where he covered various trends in the industry, including fuel prices and linehaul rates. He highlighted the near-term impact of Hurricane Harvey on fuel prices and capacity, particularly in the Gulf Region, and concluded with this 18-month outlook:
- Linehaul Rate increases of at least 3% to 4% (perhaps as high as 6% to 8%)
- Fuel Price increases on the order of > 3% in 2017 — and another > 7% in 2018
- Overall productivity (miles per truck per day) to decline industry wide by about 3% to 4% in the coming year
- Non-dedicated trucks to have as many as 4-6 loads available on any given day
In short, Chrencik’s outlook is similar to what many industry analysts and economists are saying at the moment: another transportation perfect storm is forming, similar or perhaps worse than what the industry experienced in 2004, so you better start preparing today if you want to weather it successfully. He offered the following advice:
- Be a good Shipper or Consignee (i.e., be a “Shipper of Choice”)
- Private Fleets: invest in owned and operated fleet
- Dedicated Fleets: partner with an asset-based carrier for long-term, guaranteed capacity
- Investigate Modal Changes, including Intermodal options
- Establish longer-term relationships with core carriers
This is not new advice, yet many shippers have failed to explore or adopt these practices despite experiencing hardships in the past when trucking capacity got tight.
On the second day of the conference, Lee Miller, President of Miller Transporters, provided a carrier’s perspective on the state of the transportation market, with emphasis on the what he considers to be the most critical factor in the industry: drivers.
Miller highlighted the results of a 2016 driver survey conducted by Overdrive & Trucker News. Drivers were asked, “What is the one thing you dislike most about your job today?” Here are the top seven answers they gave:
- Regulations (45.0%)
- It’s a thankless job (19.5%)
- Not making enough money (13.3%)
- Nothing (9.1%)
- Not enough home time (6.2%)
- Bad for my health (5.0%)
- Not enough miles/loads (1.9%)
With regards to regulations, the electronic logging devices (ELD) mandate and hours of service (HOS) topped the list of concerns. Miller made the case that shippers and carriers had the most control in addressing dislikes # 2 and #3 — that is, showing drivers more respect and actively showing our appreciation for the job they do, which includes paying them more.
Back to the revolution theme, I focused my keynote presentation on the points I highlighted in my recent post Unlearning Supply Chain Management — i.e., that in order to become a Company of Tomorrow, you have to unlearn “the way we’ve always done things” with respect to yesterday’s processes, technologies, and business models.
I also had the opportunity to facilitate two executive breakout sessions, one focused on Defining Your Own Logistics Competitive Weapon and the other on Enabling the Digital Supply Chain. I don’t have the time or space to go into all of the details of what we discussed, but I’ll share a couple of quick takeaways:
- Crossing the chasm from “Logistics as a Cost Center” to “Logistics as a Competitive Weapon” requires a change in culture and mindset. — not only within your company, but across your trading partner network too (shippers, logistics service providers, and consignees).
- A lot of supply chain and logistics executives are intrigued by blockchain, yet they don’t really understand what it is or how it works. Is this a technology in search of a problem? Is it really a better mousetrap than what exists today? A lot more education and selling needs to take place in order for blockchain to gain traction in supply chain management (and this includes convincing supply chain software vendors too on the merits of blockchain).
In summary, whether it’s a revolution or an evolution, there is a lot happening in the transportation industry today, and you can either try to navigate these waters on your own or you can work together with your trading partners to chart the best path forward.
Choose carefully because your survival (success) depends on it.