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3PL Update from in.sight: It’s a shipper’s world for now, but the sky’s the limit

As 2019 comes to a close, we take a look at the current freight market and the factors that have shaped it throughout the year, and what may be coming in 2020.

Bob Voltmann, president and CEO at Transportation Industries Association, recently spoke at Trimble’s in.sight user conference + expo and gave an update on what the market looks like for shippers, carriers and third-party logistics (3PLs) providers.

 

External market pressures

Voltmann says it’s currently a shipper’s market – less so for carriers and 3PLs. “Margins are down, but profits are up,” he adds. This is due to a variety of factors affecting the U.S. economy, including hiring, wages, consumer consumption and more. Most of these factors are on a positive trajectory, but mediocre or volatile performance in areas such as trade, manufacturing and housing have created an environment of uncertainty.

One troubling insight Voltmann shared is that consumer confidence in the economy is middling at best. With a potential recession looming on the horizon in 2021 and new tariffs, many companies have stocked up on inventory in recent months and are now sitting on it.

Near-term changes that could affect the market include the 2020 election, changes to the Affordable Care Act and infrastructure funding bills backed by fuel tax increases. Voltmann points to additional factors such as potential hours-of-service (HOS) rule changes and autonomous trucks as things to keep an eye on in coming years, but currently are not meaningfully affecting the market.

 

Back-office efficiencies

In times like these when margins are thin, Voltmann stresses the importance of cutting operational costs, particularly in the back office. Technology solutions like Transportation Management Systems (TMS) that automate processes, he says, are crucial to creating efficiencies and optimizing operations.

“You can’t spend 12 phone calls to get a truck onto a load when margins are down,” Voltmann says – it’s inefficient and simply unsustainable.

Overall, Voltmann predicts that trucking rates will stay compressed until the economy heats up, or smaller companies leave the marketplace, especially later in the year. “Economists have predicted that smaller trucking companies that aren’t operating on a TMS and running their businesses as cash will see major failures at the end of 2019 and early 2020.”

 

Sky’s the limit

Although the market is currently skewed in favor of shippers, Voltmann says the sky is the limit for 3PLs.

“You are the disruptors,” he said. “There’s no limit to where the market can go. It’s been growing for the past eight years, and there’s a need for 3PLs.”

Voltmann cites a highly fractured freight industry as a net positive for 3PLs, as there is opportunity to take market share from other areas in transportation, such as intermodal, by leveraging customer service as a value-add.

“You are the disruptors,” he said, of 3PLs. “This is a service-oriented business. It doesn’t matter how big or small you are to know that service matters. It’s all about service and being innovative.”