Transportation Management Perspectives: Shippers vs. LSPs

Insights into the North American supply chain from Descartes’ 2024 Global Transportation Management Benchmark Survey

The role of transportation management has become more critical than ever as companies strive to balance efficiency, cost, and customer satisfaction. To explore industry perspectives on transportation management and supply chain trends, Descartes recently conducted the 2024 Global Transportation Management Benchmark Survey, its 8^th annual study that this year included responses from 630 companies globally.  

This article focuses on the responses from 222 shippers (retailers, manufacturers, and distributors) and 95 logistics service providers (LSPs) across North America. The survey data takes a deep dive into how shippers and LSPs perceive today’s supply chain challenges, the strategies they employ to address these challenges, and the technologies they believe will shape the future of transportation management. Whether you’re a shipper or LSP, these insights can help you stay ahead of the curve and position your company for success.

Preparing for Industry and Regulatory Changes

One of the primary concerns for companies with transportation-intensive operations is how industry and regulatory changes will impact their businesses in the coming years. With this in mind, the survey asked respondents to identify the top three changes they believe will have the greatest impact on transportation management over the next five years. 

Fuel cost was the top concern for both shippers (58%) and LSPs (38%) (see Figure 1). Because fuel prices are a significant component of transportation expenses, fluctuations can have a substantial effect on profitability, which may explain why shippers focus on this issue more than LSPs by 20%. On the other hand, carrier charges tied with fuel costs as the top consideration for LSPs (38%), while carrier charges was only ranked fourth by shippers (31%).

Figure 1: Top changes expected to have greatest impact over next 5 years

Driver shortages was selected in second place by shippers (36%), which was significantly higher than LSPs at 29%, and in third place overall for LSPs. Driver shortages has been a top concern in previous surveys, but it dropped one place in the ranking this year. Environmental regulations rounded out the top three concerns for shippers, and also presented the second largest gap between shippers (32%) and LSPs (23%). As federal and state regulations continue to evolve, companies must be ready to adapt and comply with new standards.

How are companies handling these challenges? The survey asked respondents to select the top two strategies they are using to prepare for industry and regulatory changes. Investing in technology was the priority for    shippers (42%) and LSPs (40%) (see Figure 2), indicating that both groups expect technology investments will help them stay competitive. 

Figure 2: Top strategies to prepare for industry and regulatory change

Changing transportation strategy was a close second choice for LSPs (39%) – much more than shippers (28%) – while looking for new transportation service providers was the second most popular strategy for shippers (35%), closely followed by LSPs (34%). Cost-cutting was also favored, with 32% of both shippers and LSPs looking to reduce costs to maintain profitability in an unpredictable supply chain environment.

With strategies in place to adapt to change, a significant majority of both shippers (61%) and LSPs (67%) expect their companies to grow by 5-15% annually over the next two years – a generally optimistic outlook despite the supply chain challenges they face. A smaller percentage, 14% of shippers and 13% of LSPs, even expect growth to exceed 15%. However, a noteworthy minority anticipate limited or no growth, with 6% of shippers and 5% of LSPs expressing concerns about stagnation.

Improving Transportation Value

Regarding strategies to improve the value of transportation, shippers opt for expanding delivery options for customers (41%) –  a tactic that can help improve customer satisfaction and differentiate services. Conversely, only 26% of LSPs chose this strategy, electing to offer high-value services to customers (44%) instead, compared to only 21% of shippers (see Figure 3). Cutting costs and automating transportation processes were the next top strategies for shippers (33%) but were selected at a lower rate by LSPs (24% and 28% respectively).

Figure 3: Top strategies to improve transportation value

In terms of capabilities, visibility was seen by a majority of shippers (54%) and a plurality of LSPs (45%) as critical to managing transportation effectively. In today’s connected world, real-time visibility into shipments is regarded as crucial for optimizing operations and meeting customer expectations.

Order management and “fleet routing & execution” were also key capabilities for both shippers (44% and 39%) and LSPs (40% and 34%), with a slightly higher emphasis from shippers. LSPs also preferred performance management and BI dashboards (40%) and carrier sourcing (41%) compared to shippers at 31% and 34% respectively, possibly reflecting the need for LSPs to manage complex logistics operations efficiently.

Embracing Transportation Management Technology

As mentioned earlier, investing in technology was the top strategy chosen by both shippers and LSPs to help them navigate a changing supply chain. In terms of technology adoption, most shippers (36%) and LSPs (51%) identified themselves as Fast Followers, preferring to quickly implement proven technologies rather than be the first to experiment with cutting-edge innovations (see Figure 4). However, shippers (32%) are more aggressive as Early Adopters compared to LSPs (24%), suggesting that some shippers are more willing to take risks to gain the advantages of new technologies. 

Figure 4: Organization approach to technology strategy

Only a small percentage of respondents see their companies as Laggards – 4% of shippers and 7% of LSPs – signifying that shippers and LSPs recognize the need to stay current with technological advancements as a key transportation management strategy. This is also demonstrated by the fact that approximately three-quarters of both shippers and LSPs plan to increase IT spend in transportation management over the next two years, with 23% of shippers and 20% of LSPs increasing spend by more than 5%.

Few respondents noted a reduction in technology spending, but LSPs (5% total) were more likely to reduce tech expenditures than shippers (1%). This is potentially due to the softer transportation market for truckload rates that North America has experienced over the past couple of years, which can have a negative impact on LSP profits.

As companies face the increasing pressures of a volatile supply chain including rising fuel costs, regulatory changes, disruptions, and shifting customer expectations, the ability to adapt and innovate will be critical for success. Accordingly, transportation management technology continues to play an essential role. Both shippers and logistics service providers acknowledge the importance of transportation visibility as they continue to invest in technology and improve the value of their transportation services.

Michael Hane is Director of Product Marketing at Descartes.