March 2, 2018 New Trends Will Disrupt the Freight Industry

Recent changes to freight industry rules and labor trends are creating headaches -- and opportunities -- for shipping vendors of all sizes.

February 26, 2018

by Mike Wagner, President/Founder of Target Freight Management

Technology comes and goes. Employment trends rise and fall. And regulations expand and contract as new rules replace the old. But when these changes happen all at once, it creates challenges for even the most experienced companies.

Here are three things you need to know if your livelihood depends on timely and cost-effective shipping processes — and three ways you can get ahead of these challenges before they become catastrophes.

Driving on Empty

According to short-term ATA job projections, the trucking industry needs to add nearly 1 million new drivers to meet rising demand for delivery solution.

But there’s a problem: if our current shortage of qualified applicants continues, we could see over 100,000 of those jobs left unfilled by 2026. That’s a lot of shipments left idling with no one to move them.

On the upside, it’s also a market opportunity for technologists who find smarter ways to optimize LTL shipping so the drivers who do show up are moving as much critical material as possible.

What Can You Do?

• If you hire drivers directly, review your hiring and employee retention practices to make sure you don’t lose your best candidates during a talent shortage
• If you rely on freight experts to deliver your products and materials, consider the effect that driver experience and wages may have on your vendors’ bottom lines — and use that as leverage to negotiate better rates with both your clients (who expect problem-free delivery) and your vendors (who need reliable revenue to provide the benefits that keep their highest-performing operators happy)
• Consider using 3rd Party Logistics (3PL) partners whose robust networks make optimal use of available fleet resources, which saves you time and money

ELD Compliance Becomes Mandatory

The electronic logging device (ELD) mandate that was established in 2015 officially went into effect in December 2017, with a “hard deadline” of 100% compliance expected by April 1. This mandate requires drivers to use approved ELDs to log and report their hours, and the data from these devices is expected to help reduce congestion and improve road safety nationwide.

To comply, many fleets must completely overhaul their reporting processes, and even those who have temporary exemptions must gameplan for near-future replacements. For example, vehicles that currently have Automatic Onboard Recording Devices (AOBRD) installed are exempt under the mandate until December 2019, by which time their AOBRDs must be completely replaced by ELDs. Any way you look at it, this is an expensive investment that the freight industry expects to recoup.

What Can You Do?

• If your fleet isn’t currently ELD compliant, set a timetable by which you will be in order to avoid potentially costly fines
• If your fleet is ELD compliant, consider using that as a selling point to promote your forward-thinking approach to technology and safety
• If you rely on freight vendors to transport your materials, ask them about their ELD compliance so you can be fully aware of how their status may affect their performance and pricing

Walmart and Amazon Apply Market Pressure

Amazon and Walmart don’t directly compete with heavy industry (yet), but their business choices have long-term effects that can’t be overlooked — especially if other industries consider their blueprints to be worth following.

As the Wall Street Journal recently reported, Amazon is considering entering the shipping business. While that’s an obvious concern for UPS and FedEx today, you can also bet that any inroads Amazon makes in disrupting the B2C shipping industry will soon have echoes in B2B, particularly where personnel, processes, and logistics are concerned.

Meanwhile, under Walmart’s new On Time In Full (OTIF) supply chain rules, suppliers will be fined for delivering early or late, or for delivering less than 100% of an expected shipment. Beginning in February 2018, Walmart’s FTL suppliers must hit their Must Arrive-By Date (MABD) 95% of the time or receive a fine, and their LTL suppliers must hit the MABD at least 36% of the time. (It’s worth noting just how rarely their LTL suppliers must be hitting that mark today if Walmart sees 36% as an improvement.)

Non-compliance with these rules will result in a chargeback of 3% of the shipment’s “missing case” value. Early and late shipments will also incur additional penalties.

Given that Walmart’s OTIF policy is expected to generate nearly a billion dollars in new revenue via supplier fines, you can expect wholesalers, retailers, and B2B powerhouses to be keeping a close eye on the vendor behavior changes and bottom line bonuses this new rule creates.

What Can You Do?

• Stay up-to-date on the ripple effects that these changes may cause to ancillary industries
• Review your supply chain and ensure that it’s optimized to meet stricter delivery standards before they become mandatory
• Partner with logistics experts who specialize in precision and efficiency, so your entire process becomes one worth emulating instead of one that needs an emergency repair

These trends in the freight industry are signals of long-term changes to come. By keeping up with innovations and wisely investing in strategic improvements, you can be sure that your company won’t get caught off-guard when a new headline forces your competition to change their behavior overnight.

About the Author
Mike Wagner is the President and Founder of Target Freight Management, Inc., which began operations in 2009. Thanks to its patented and proprietary shipping technology Freight Innovation Density Analytics (FIDA), Target Freight was named #71 on 2017’s Inc. 5000 List of the fastest-growing privately-owned companies in the U.S. — up 11 spots from their #82 ranking in 2016. Mike was recently honored as Ernst & Young’s 2017 Entrepreneur of the Year. Mike and his family live in his hometown of Pittsburgh, PA, where he also coaches varsity baseball at his alma mater, Seton LaSalle High School. Mike’s Twitter: https://twitter.com/mwagner_25

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