Tariffs, technology, slowing economy drive 3PLs to adapt — again
2020 is shaping up as a uniquely challenging time for freight brokers and third-party logistics service providers. Those who can adapt may find opportunities aplenty.
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
Third-party logistics service providers (3PLs) and freight brokers face another challenging year ahead. Among those challenges are the ongoing consequences of geopolitical events, the battle over tariff and trade policies, a global manufacturing and industrial sector that's tapping the brakes on output, new technologies disrupting traditional models, and difficulties in finding the next generation of logistics professionals—including truck drivers.
Above all else, shippers are looking to their 3PLs and brokers to be flexible, responsive, and creative in helping them overcome a myriad of supply chain challenges.
"There is an emphasis on supply chain agility, creating the ability to modify supply chains [quickly] to accommodate situational 'best cost,'" says Michael Labadie, global lead for automotive and industrial at Houston, Texas-based 3PL Crane Worldwide Logistics.
The impact of the trade war has been "increased cost pressure on transportation and increased focus on customs and importation practices," Labadie says, adding that as the tail end of 2019 approaches, demand for transportation and logistics services in North America and moving goods from China continues to soften. "I cannot emphasize enough that there are winners and losers in every change that is made in global trade," says Labadie. He believes 3PLs remain a key enabler that can help shippers sail through choppy trade waters and mitigate the worst impacts.
Jason Bergman is chief customer officer for Overland Park, Kansas-based YRC Worldwide and its logistics arm, HNRY Logistics. He agrees with Crane's Labadie that "supply chain flexibility is the most requested" capability sought by shippers today because of all the current market uncertainty. HNRY Logistics, Bergman says, specializes in "finding high-quality and consistent solutions" for customer supply chain needs. "The goal," he says, "is to create consistency and continuity" in any economic cycle.
HNRY Logistics is an "asset-backed" 3PL that has access to the capacity, coverage, and resources of its sister trucking units at YRC Worldwide. Bergman says the asset-backed model is a value differentiator. "At the end of the day, it's about consistent communication and a seamless experience for the customer. When you take our logistics arm and combine it with our assets, that provides a significant advantage," he says.
Going into the new year, what are three core issues that keep Bergman up at night? "Attracting and retaining quality talent. Managing our business in a time of economic uncertainty," and "managing in a more difficult regulatory environment," he says.
TOSSING OUT THE OLD PLAYBOOK
Flexibility and diversification are two qualities that Randy Sinker, vice president of commercial sales for Winnsboro, Texas-based 3PL Team Worldwide, says are critical to successful logistics service providers. "If you are a traditional freight forwarder and you don't diversify and become more flexible, you will go out of business," he says.
He cites the uncertainty of tariff and trade policies as well, which have made manufacturers reluctant to pursue investment and growth plans, and have reduced freight volumes, particularly air freight. Shippers also continue to embrace vendor consolidation strategies, winnowing down their list of suppliers to small teams of highly skilled and resourced core logistics suppliers. All of that means a 3PL's service portfolio has to stand out and demonstrate an ability to consistently solve an ever-growing list of supply chain challenges if the company hopes to stay in the game. "It's expensive [for shippers] to use different companies," says Sinker. "Those that can do more [for the shipper's supply chain] and who can think outside of the box will remain competitive and successful."
He adds that shippers, while still requiring competent performance of tactical logistics tasks, increasingly want strategy help. Sinker believes it's imperative for 3PLs to be able to "plan with customers for what's [expected to] happen a year from now, not [just] tomorrow's shipment."
Privately held Team Worldwide operates under the "agency" model, which Sinker believes is a unique strength. The company covers a broad swath of the supply chain: import/export ocean and air, customs brokerage, warehousing and distribution, and final mile. Sinker says chief among its strengths is an entrepreneurial culture, with each station having local ownership and control. "We tell customers we're large enough to service you and small enough to know you," he adds.
Unlike larger 3PLs, which are leaving smaller cities and consolidating operations in regional offices, Team Worldwide is expanding into secondary and tertiary markets, complementing its presence in key metro areas. The company has opened eight new offices in the last 22 months, currently has over 45 local branch offices within North America, and has additional expansion plans on the drawing board for 2020. "The biggest thing we push is service," says Sinker, citing the value of a flat organization with minimal bureaucracy and red tape. Decisions on operations and customer service are made "where the rubber meets the road at the branch level, with the branch owner."
THE VISIBILITY CHALLENGE
In addition to the strategic challenges, 3PLs and brokers face constant pressure on the technology front. The emergence of new tech providers such as Uber Freight, Convoy, and others hawking new digital brokerage platforms and visibility solutions has forever changed the logistics market—and forced traditional players to evolve and adapt.
That means a 3PL's or broker's tech platform has to be able to tap into—or otherwise effectively interact with—multiple transportation sources, management systems, order platforms, and online marketplaces. Industry executives say they're consequently faced with tough decisions about how to upgrade and modernize their technology platforms to support these new systems, which are becoming ingrained in normal supply chain operations. "If you don't, you'll be left behind," says one executive.
Geoff Turner, founder and chief executive officer of Preston, Maryland-based 3PL and freight broker Choptank Transport, is familiar with this dilemma. Turner says Choptank's top request from customers is for visibility into their loads—including where they are en route and if they'll meet the projected ETA. That's been a challenge, especially in a fragmented truckload market where some 80 percent of capacity is provided by thousands of "micro" carrier fleets of 10 or fewer trucks and independent owner-operators.
Like many progressive brokers and 3PLs, Choptank has been methodically investing in and improving the technology tools and capabilities his customers and carrier-partners want. In a given year, Choptank will engage with some 30,000 trucking service providers. To help customers navigate this complexity, Choptank deployed a visibility solution from Reston, Virginia-based Trucker Tools, which has increased carrier visibility compliance from less than 30% to consistently between 90% and 95% of loads, according to Turner.
"Those I speak with say not many [brokers and 3PLs] are seeing tracking success at this level. It's a benefit that goes directly to our customers and solves one of their most pressing needs," he says.
Logistics has always been an evolving and competitive space, with technology continually pushing the boundaries. But as Turner sees it, technology is not the whole story. One area where he says traditional brokers still have a value advantage is the tribal knowledge and expertise of skilled, experienced people, and the relationships they maintain with the carrier community.
"When there is an issue, they [carriers] really want to talk with someone," especially when exceptions come up or an issue arises at the shipper's dock. "It's that ability to [get on the phone with someone and] quickly resolve an issue" that might otherwise delay the driver or potentially cause harm to the shipper's supply chain. "Carriers are our customers too, and they want to work with people they know, trust, and like," so the personal connection, especially for managing exceptions and solving urgent issues, still makes a difference, Turner says.
EMERGENCE OF "MARKETPLACE SYSTEMS"
Greg Aimi, research vice president with Gartner Inc., has trod the logistics business's winding path for nearly 30 years, running software companies, managing logistics operations, and studying the market as a research analyst. He sees this most recent revolution of digital transportation platforms diverging into two models.
In one model, companies are essentially "coming up and saying your people-based [approach] is unnecessary. The whole process can be automated." These tech platforms, Aimi believes, are disintermediating the traditional broker. They are licensed brokers who are "allowing demand to source supply through their network. I can connect the parties automatically ... and let the constituent parties work together directly." In this case, the "platform" is doing the transaction.
In the other model, companies are essentially taking the current traditional brokerage model and automating the process of freight matching, booking capacity, and tracking loads. Aimi describes these as "marketplace systems," which engage multiple carriers and brokers, "enabling platforms where the constituents are doing the transactions themselves" and carriers are working on the platform with brokerage houses "to quickly provide [and secure] quoted capacity."
He notes that one of the biggest benefits to a carrier of this third-party multiparty platform model is a one-to-many relationship. "As someone [a carrier] who has capacity, I can put myself on many networks, but I prefer this [multiparty, multibroker] one because it is low cost, it's more lively, and I get [automated] matching of supply and demand" that can be refined and targeted to a specific geography, city, lane, or type of load, he explains. In this case, the parties themselves still participate in the transaction but with the support of automated, intelligent systems. It's also easier and less time-consuming for the carrier to manage versus being on multiple single-use platforms.
He says it is an enabling marketplace of supply and demand in which small to mid-market brokerage players can jump on the platform and have the same technology power as the big digital guys, but still with the benefit—and advantage—of what Aimi calls "customer touch."
The network is the "big deal," Aimi says. But when it's all said and done, for traditional brokers and 3PLs, "customer touch will [continue to] make them different."
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”