We all know that the transportation market is cyclical, but it’s been a roller coaster ride the past couple of years, with the COVID-19 pandemic being the latest shock to the system. Despite the ups and downs, the objective remains the same: shippers must keep finding new ways to drive continuous improvement and control costs in their transportation operations. This is particularly true in how they leverage the spot market.
What are some of the challenges in leveraging the spot market? How are transportation management systems evolving to help shippers find this capacity quickly, efficiently, and at a fair price? Those are the main questions I discussed with Anthony Vitiello, Head of Sales at UltraShipTMS, a PCS Company, during a recent episode of Talking Logistics.
State of the Transportation Market
Given the upheaval in the marketplace over the past year, I began our discussion by asking Anthony to share his thoughts on the current state of the transportation market. Anthony relates that it is no surprise that the transportation market is in flux. But the pandemic has exposed weaknesses and shortcomings in the transportation capabilities of shippers, especially in dealing with the spot market, and also in their use of technology.
“What we have seen is that the pandemic has accelerated the timeline for shippers to source and implement technology. What might have been a ‘nice to have’ 9-12 months ago is now a priority, not only because of the challenges brought on by COVID but also to meet their needs going forward,” Anthony says. “Another thing I’m hearing is an extreme need for flexibility due to the changes in shopping habits and instability in the supply chain. The question then becomes, how do we manage capacity and costs?”
Spot Market Challenges
To deal with market fluctuation and capacity issues, many shippers are increasingly turning to the spot market. What challenges does this impose? Anthony notes that one of the challenges is that many transportation management systems (TMS) were not designed with spot market automation tools built in. “One of the biggest challenges without these capabilities is the timeliness factor. The spot market is used most often for expedited shipments and uncovered loads that you have to get on the road.
“Another challenge is getting clarity on real-time rates on each lane. You need automation tools that give you the current rate structure given today’s market environment. Also, without automation, there is a great deal of effort in going out to bid on spot market shipments that takes away from all the other day-to-day activities shippers must handle.”
How Automation Tools Can Help
Some TMS providers have added spot market automation tools to help shippers deal with the challenges in the spot market. “Finding capacity quickly, efficiently and at a fair price requires automation that enables you to run micro-procurement events and minimize the manual effort involved,” says Anthony.
“How it works is shippers can set up micro-procurement events for specific lanes or groups of lanes and tender them to a small group of core carriers and/or other carriers in the network that meet their criteria for bids. The system collects and analyzes the bids and displays to the tendering carriers whether theirs is the current low bid or not so they can rebid, if appropriate. The shipper can then select the best bid. This should result in the shipper getting current best rates on each lane.
“Also, by creating these specific carrier groups based on relevant criteria, such as lanes covered, type of equipment needed, etc., you ensure the bids will be meaningful to the carriers so they will be more likely to respond because they know this is business that aligns with their network and they have a reasonable shot at winning.”
Benefits of Automation Technology in the Spot Market
Anthony says, “The primary benefit of this technology is quick and accurate access to capacity when you need it. There is no ‘dialing-for-diesels’ or manual effort to get that done. Another big benefit is once the shipper selects the bid, they can ask the carrier for permission to publish that rate in their TMS routing guide. You’re effectively updating your routing guide with real-time rates.” This can also improve your tender acceptance rate from carriers because the rates in your routing guide reflect actual market rates.
Lessons Learned for 2021
So, how should companies apply the lessons learned from this past year to decisions going forward in 2021? And how will machine learning and predictive analytics figure into future operational benefits? Anthony has some interesting thoughts on these topics, so I encourage you to watch the full episode for all of his insights and advice. Then keep the conversation going by posting your own thoughts and predictions for 2021.