3PL Perspectives
Lance Healy | Banyan Technology
LTL Market Conditions
Domestic freight markets are always changing, but now logistics is fundamentally evolving as well. Rapidly changing industry technology is entering our space, while simultaneously, established technology from outside of the industry is adapting to advance our operations. Demographic and consumer expectations, coupled with technology, are accelerating changes.
Consumer shopping habits and the siren song of free next-day or two-day delivery have lured my own Gen X peers away from the shopping malls. My parents are even shopping online, and millennials simply expect to shop from their mobile devices. The response to this huge tech-enabled change in spending habits is that the warehouses are getting smaller, more plentiful, and closer to the consumer for faster delivery. This market condition is ideally suited for LTL replenishment over traditional FTL. The millennial demographic now exceeds the baby boomers. These younger adults entering the job market have more income to spend on their young families and first homes, and they are just getting started.
People change faster than business systems and logistics networks. For the savvy professional intermediaries, this change also creates opportunity. Third-party firms are the most aggressive at adopting new technology that advances the industry. The third-party market for LTL is dominated by a handful of large LTL brokers that smaller brokers had to partner with to resell. Primarily, this is because the LTL carriers didn’t want to extend more blanket pricing that blocked their direct sales efforts. The conundrum for predominately FTL brokers or newer 3PLs is that they cannot get competitive LTL pricing because they lack volume, and they can’t get volume because they lack competitive pricing. As a result, they work with the large LTL brokerage firms that are also pursuing the same direct FTL clients which put their core business at risk.
Technology is emerging to level the field and enable 3PLs to offer LTL, capitalize on the market evolution, diversify their offerings, and establish direct LTL-carrier relationships.
LTL Carriers’ Perspective
Walk with me for a minute in order to understand the LTL carrier’s needs to fully grasp how the technology gets applied. A carrier’s networks change daily. The more risk they can mitigate the better. The carriers had issues with 3PLs because of margin erosion and inefficient operations due and poor execution and billing issues.
Smart containers are equipped with a host of internet-enabled technology to track and transmit Temperature, shock, door openings, and breadcrumb tracking to customers.
3PLs that want to build an LTL business need to engage a TMS company that has expertise in fully functional LTL APIs from rating through tendering and freight bill management. Do not think that because there are some static tables, or even basic API rating tools, that this is a competitive offering to the future. Here’s why:
Carrier operational efficiencies have a huge impact on profitability, and a properly enabled TMS will provide better data at the moment of tender, (i.e., tie in the Pro# to the BOL enabling carriers to close linehauls faster and better optimize their networks). Phone calls, emails, and EDI are limited in the data shared and are expensive for the carriers. Some LTL carriers are offering discounts for fully automated interactions to entice their clients to change. The efficiency of operations is one contributing factor behind major LTL carriers offering their own branded multicarrier TMS solutions to the market. By making their customers more efficient, they can perform at a higher level.
Rate Technology
LTL carriers don’t like offering blanket rates. Rather, they introduce risk and mask details needed for efficient operations. If 3PLs are leading negotiations with that approach, consider revising it to a true dynamic tariff for the smaller accounts and get client-specific rates established when or if appropriate.
Through API connections with carriers, 3PLs can make their offerings much more versatile. A true dynamic tariff enables carriers to offer pricing without a contract or the risk of a blanket rate. Further, because they have no committed rate or volume, the rate can move up or down as the needs of the network change; thus, the carriers can get more aggressive on pricing than with a contract. This model obviously works best when the 3PL has smaller volume and operates on a cost-plus margin basis.
Carriers are driving their internal technology investments to reflect more dynamic pricing options both with and without a contract. Static tables and older TMS systems cannot take advantage of these opportunities. Upgrade your TMS or augment your current system with an LTL specific add-on.
Intelligent Pricing
LTL carriers are embracing the new technology that moves their pricing closer to selling seats on airplanes to better correct lane imbalances, test pricing, adjust for seasonality, expand new geographies, and create agility to adjust pricing as their networks change without having to reopen contracts. For high-volume LTL users, Intelligent Pricing refines the concept of true dynamic pricing and enables carriers to instantly offer pricing incentives on top of the discounts that are already contracted to shippers or 3PLs through a specific API set. These adjustments, called Live Lane Specials, are automated to appear directly within a shippers’ TMS workflow as the shippers, or their optimization systems, make the routing decisions.
The carrier’s yield managers access a toolset that allows them to define a targeted segment of the market by geography, shipment attributes, clients and even customer behaviors. The yield managers choose the amount of the incentives and the timing duration. They can define multifaceted rules and then schedule them to run for predetermined times, or simply turn it on and off as needed. Carriers create baseline pricing that best suits their individual network, and then use the Intelligent Pricing solutions to maximize their efficiencies with the agility and speed of today’s market. Contract LTL companies have realized a more than 7% reduction in their LTL spend through the direct-from-carrier Live Lane Specials.
Containerizing LTL Freight?
New technology applications are coming into the LTL market from a variety of industries. One to keep your eye on is smart shipping containers. These smart containers eliminate the expensive, dedicated equipment used by the traditional moving companies that require a special flatbed to pick-up and haul. Smart containers are equipped with a host of internet-enabled technology to track and transmit temperature, shock, door openings, and bread crumb tracking to customers. Leased like shared bikes or scooters, they are secure, durable, forklift friendly, and also have wheels to move easily inside a warehouse or a driveway. Standard LTL rates are orders of magnitude less expensive than moving and storage fees, so the consumer is paying substantially less for the move. The units are so tech-enabled they can schedule their own pickup to another job and optimize themselves across multiple units.
The LTL carriers with the forethought to apply the new technology can extend beyond just a smarter moving and storage offering. They can offer premium services without the expense of custom equipment. Secured, premium tracking or temp-controlled services can be made available through their standard LTL line haul networks. There’s an immediate application for high-value goods or pharma. Shippers may elect to engage these units on an as-needed basis, and retailers can adopt these for heavy residential freight deliveries.
Plan Your LTL Strategy
Don’t overlook LTL. There are a great number of technologies available, many of which open new markets or dramatically increase margins because of cost reductions or operational efficiencies. Look to the future demographic and what’s happening outside of logistics for a solid view on what’s coming into our market at an increasingly rapid pace. Find what’s right for your business and invest in your future.
The author, Lance Healy, is Co-Founder & Chief Innovation Officer with Banyan Tech-nology. He may be reached at 216-387-1734 or [email protected]
Image credits: iQoncept/Shutterstock.com, vectorpouch/Shutterstock.com
