By: Jeff Tucker, CEO, Tucker Company Worldwide

Transportation in 2018 was a year of continued upheaval. To those of us who feel the trucking market is a living and breathing entity, it validated that, and we are beginning to be able to identify some of the predictable conditions that are recurring. We witnessed the ongoing migration of drivers joining smaller fleets or becoming owner-operators at a pace of more than 2-1 (100 trucks or less gained 366,311 drivers since 2012, while fleets with 501+ have only snagged 176,058). That trend has contributed to the biggest carriers’ inability to add capacity. Simultaneously, the biggest shippers’ strategy of using brokers only as a backup to their asset-based providers, in the so-called “waterfall” swelled the spot market to a peak this past summer. The results? High prices, late shipments, and blown budgets, to name a few. These market inefficiencies, combined with slow-to-react transportation buyers caused an abnormally large spot market which was a mirage, destined to fade.

So what are we seeing so far in 2019? Data from Truckstop.com, SONAR and DAT all point to a softening in the spot market during the last half of 2018, and the first quarter has felt pretty normal. There are many possible contributing factors. Has the market overcorrected, like markets often do? Did the addition of over 611,000 drivers to the for-hire fleets, bringing the number to over 2.5 million drivers, change the capacity equation? Has tariff uncertainty halted trade enough to let the steam out of the market? Wall Street’s feeling the uncertainty – we saw all of 2018’s gains reversed by Thanksgiving, with experts citing concern for global and U.S. growth, led by tech declines. Any one of these factors is enough to prick the capacity shortage bubble, and restore pricing power, at least temporarily, to buyers.

What is certain is that the industry is evolving faster than it ever has before. Exorbitant (and often foolish) investment in transportation technology and startups is spurring new ideas, which are often “borrowed” as quickly as they’re learned and incorporated into existing businesses and software. “Digitalized” freight is the latest buzz phrase, which will start to come together as technology providers consolidate.

The most significant new pressure driving change in the industry, in my opinion, is the e-commerce and traditional retailers who have quietly, and substantively, rewritten the industry’s playbook overnight.  The various compliance fee regimes imposed by most major retailers, grocery and drugstore chains (sometimes referred to as “OTIF” or on-time and in full) have turned trucking into a precision sport, with massive financial consequences to the product manufacturers. With their bottom line at stake, manufacturers are turning the screws on their transport operators—which isn’t the answer. America is a consumer-based economy. Retail is the largest segment of our economy. Between 2017 and 2018, retail changed trucking, probably forever. Pricing models simply haven’t caught up yet.

Technologies that enhance the customer experience are always front of mind. But in order to succeed in 2019 and beyond, the transportation industry will rely more on services that improve on-time pickups and on-time deliveries, and provide visibility into all shipments to better coordinate with retailers. With profit margins on the line for manufacturers, the old procurement line at bid time, “we assume all service is equal” is Stone Age talk.  Service matters more than ever before – and certainly not all providers are equal! Those transportation providers that can harmonize service, capacity, and technology, will lower costs and achieve results for their shippers.

Attend any transportation tech event, and you’ll hear “digitalizing” the supply chain and “democratization” of big data 86 times before lunch (and has anyone else noticed that they’ve stopped talking about how 3D printing will change transportation?). Attend tech expos, and you can expect to see 101 of the coolest ideas you wish you had in your TMS—from 101 different providers. However, you can’t leave a fully functioning, thorough TMS because one provider has a really cool trick in one small area, and a totally inadequate TMS otherwise. Nobody’s put it all together. It’s impossible right now. ELDs were the watershed moment in trucking. However, there are many ELD providers — and some are easier than others to extract usable data to increase efficiency in the supply chain. Certain carriers will share their data with you — but inevitably, some won’t. And there are those that simply can’t. Shipper Transportation Management Systems (TMSs) are usually extensively customized for the specific shipper, with different inputs, outputs, and objectives, even if many shippers use the same provider.

There’s a long road ahead for the industry to reach the utopian digitalized supply chain. I believe the first step forward will entail a consolidation of tech companies, to begin to streamline and organize the data, the fields, the sharing, and the platform. We need to see consolidation of ELD providers, and/or better availability of that data. Blockchain can help here, but even that’s further in the future than many think. Our company, like many sophisticated providers, has dozens, even hundreds, of customer-specific tech customizations programmed in our TMS. Our service procedures are specialized to each individual customer, based on each customer’s specific business needs. We predict that we’ll see an even higher degree of customer specificity than ever, and the tech plays an integral role.

In order to succeed in this new landscape, you’ll need to incorporate emerging technology into your budget. One of the biggest challenges you’ll face is prioritizing where to spend tech dollars in order to get the most bang for your buck. Make systematic, small changes that pay dividends. This pace of change may be uncomfortable, but there will be clear winners and losers that come out of the next few years.

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