Market Overview

Technology Helps Ease The Transition For LTL Carriers Adapting To e-Commerce

Technology Helps Ease The Transition For LTL Carriers Adapting To e-Commerce



In a 2016 Pew Research poll, 64 percent of Americans said they prefer to purchase items from brick-and-mortar stores rather than online, all things being equal. But 65 percent also said that price was the determining factor in their purchase, and with lower prices online now the expectation if not always the norm, and free shipping to boot, the choice is becoming increasingly clear.

E-commerce is predicted to be the dominant global retail channel as early as 2022. It is growing at double digit rates each year, reaching 18 percent year-over-year growth in 2018 and global revenue of $2.86 trillion.

This change, though, is impacting far more than just retailers. It is disrupting the entire supply chain and forcing shippers and trucking companies to adjust their business plans, make different equipment choices and relocate distribution centers. Successfully doing these things, though, requires more visibility and access to data sets to see where the impacts are being felt.

For retailers, data accuracy is critical, as 66 percent identified inaccurate inventory data in the omnichannel supply chain as a significant problem in a recent HRC Retail Advisory survey. Not knowing what inventory they have, where it is located, and where it needs to go can disrupt a supply chain.

Speaking at a conference last summer, John Larkin, Managing Director of Investment Banking, Transportation and Logistics with Stifel, said that many less-than-truckload (LTL) carriers are still in the early stages of data analytics and API usage, so there is opportunity to improve optimization and pricing.

"Think about this situation – you can look ahead to next Wednesday, and you can say traffic looks light from Kansas City to Chicago, so you offer a short-term discount and fill that extra capacity up overnight. You tap into the sales horsepower that third-party logistics providers [3PLs] have at their fingertips," Larkin said.

While much of the omnichannel fulfillment challenge falls to retailers or suppliers, those efforts have a ripple effect through the supply chain. Using common software platforms or agnostic platforms to connect disparate transportation management systems (TMS) and participants throughout the supply chain, up to and including the trucking company, can help alleviate some of these issues.

The HRC survey found that only 14 percent use predictive analytics and most haven't figured out how to integrate those into their operational processes. Choosing the right solution is important, and with the right partner working to identify inefficiencies in the supply chain, shippers are able to more effectively locate product. Doing so, though, requires more LTL moves and a supply chain "dance" that benefits from logistical expertise.

Where once 3PLs were not a significant part of the LTL supply chain, that is rapidly changing as 3PLs like GlobalTranz are able to leverage technology that connects various systems, bringing the retailer, supplier and trucking company together in ways never before possible. The result is a seamless process that improves customer experience and lowers overall cost.

The HRC survey found that 77 percent of respondents ship primarily from fulfillment centers and nearly 70 percent do not optimize their order system to prioritize filling the entire order from a single location. But technology alone is not the solution to the e-commerce dilemma for LTL carriers; it can help them optimize their networks, but online consumers are still the driver that fuels freight capacity.  

Retailers are now holding less inventory at their stores, choosing instead to fulfill online orders – either delivered to the store for pickup or shipped directly to customer homes – in localized warehouses. Larkin noted that LTL carriers are well-positioned to handle this e-commerce effect. "Smaller footprint urban fulfillment centers require smaller shipments to accommodate a broad range of [stock-keeping units]," Larkin said. "LTL shipments are now more often the optimal shipment size."

“The HRC survey found that 77 percent of respondents ship primarily from fulfillment centers and nearly 70 percent do not optimize their order system to prioritize filling the entire order from a single location. ”

The result is that millions of tons of freight crisscross the country each year as it moves from location to location in a reactionary manner, hoping to arrive at its final destination in time. And the majority of that freight, at some point, is moving through the LTL supply chain.

This shift has spurred some LTL carriers to make adjustments to their pricing. Some are seeing higher accessorial revenue as the traditional warehouse pickup/delivery location is changing to include storage facilities and even homes as the number of e-commerce-only companies rapidly expands and requires special services. Many LTL carriers have implemented dimensional pricing (rates calculated based on a shipment's size rather than weight) which allows them to calculate pricing more accurately. Some carriers are charging extra for Saturday deliveries to distribution centers and stores.

Others have had to add specialized equipment, such as liftgates, and even a different mix of equipment with more straight trucks being added to fleets, just to handle this growing shipment category. Trailer leasing company Xtra Lease just announced it was purchasing 10,000 new trailers this year, including both 53-foot and 48-foot trailers with liftgates to accommodate the growing number of locations without docks.

Still others, such as Old Dominion Freight Line, are further building out their own networks with new locations to house and transport goods. In 2018, the company announced the opening of five new service centers in LTL markets across the U.S., for a nationwide total of 230 terminals. The goal in opening the terminals is to create capacity, improve service and reduce the miles between stops to service the growing e-commerce market.

Even as equipment needs change and distribution centers relocate, the need to find efficiencies still exists, and those are coming from technology, especially for the shippers. GlobalTranz, for instance, is able to tap into a network of over 120 carriers, including those specializing in LTL freight, and offer shippers the opportunity through its GTZship technology to seek a quote and then choose their transportation provider based on cost, transit time and preference. LTL carriers are adapting to the new reality of e-commerce, but so too are the retailers and suppliers, and technology is bringing the three together to build a more efficient supply chain.

Image sourced from Pixabay



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