Last month, a prominent U.S. nationwide trucking firm announced a revised technology path to out compete existing digital enabled startups in the freight brokerage area. An industry once noted as conservative and traditional is now increasingly coming to grips with digital transformation, and the implications of this “arms race” are both for the industry as well as for shippers.

Increasingly, carriers large and small are becoming more technology-savvy in leveraging and optimizing available services and assets for their own added profitability. While every business has an inherent goal to maximize efficiencies and profits, the notions become a bit fuzzy when translated to a “common carrier” services network, if that really exists at this point.

U.S. Trucking Industry

J.B. Hunt is described as one of the largest transportation and logistics companies in North America.  The company’s announcement indicates it will now be working with Google’s Cloud business unit to develop more sophisticated machine-learning models to make more informed matches among shippers and carriers that utilize the company’s J.B. Hunt 360 digital brokerage platform.

This platform serves not only Hunt’s own fleet, but a network described as representing over 700,000 trucks. Shippers can utilize this platform to compare spot market shipping rates and book shipments in a matter of minutes. They further have the ability to secure capacity or loads among a pool of carriers, similar to booking an airline reservation, hotel or rental car on Travelocity or Expedia.

According to a report from The Wall Street Journal, the trucking firm will migrate its 360 Digital platform from Microsoft Azure to Google Cloud so, according to this report: “it can, among other things, more easily access Google’s artificial intelligence expertise.”  That obviously adds a new dimension of capability to an electronic freight brokerage from both a shipper and a carrier perspective.

The problem, to be addressed, is noted that a lot of U.S. trucking firms are small, regional players, with limited abilities to invest in technology. Drivers for these firms mostly rely on delivery schedules or their smartphones to ascertain weather or traffic information, as well as make all of their often-changing delivery commitments when one stop turns out to have a long waiting time. Independent driver owned operators, can leverage their smartphones or tablets with digital freight brokerages to bid on available loads that meet certain criteria or to schedule a back haul in real-time based on the revenue and profitability that loads can provide.

Reportedly, this JB Hunt 360 effort will work with Google Cloud to analyze actual real-time data and build models that assess overall market demand, destinations and loads, along with the available capacity of carriers. What that implies is intelligence and insights as to aggregated demand and capacity condition of hundreds of thousands of rigs, as well as what routes are drawing the most demand at any given time.

From our lens, that opens the door to dynamic pricing, an analogy similar to when we as consumers want to potentially book an airline flight within 2 or 3 days of departure. Pricing becomes predicated on actual demand and available capacity, while options are presented in different weighted ordering.

 

Supply Chain Matters Insight

In prior Supply Chain Matters blog commentaries focused on the increasing multi-industry supply chain needs for more end-to-end visibility among customer focused logistics and transportation networks, as well as on the heightened investment, acquisition and IPO activity related to this segment capability, have hopefully helped readers to understand these rapidly changing dynamics.

In these prior blogs, our takeaway messages for supply chain management teams are that higher logistics and transportation costs, and now metered capacity allocation while certainly being a result of network demand and supply imbalances, may also be the result of more leveraged use of advanced technology on the part of carriers. There are already instances where ocean container carriers have instituted blank sailings or pooled shipments among their alliances despite confirmed bookings, in order to maximize revenues and profits.

The implication for shippers is having similar knowledge, but in different context. As an example, what are planned shipments and specific routings, and what tendering options, either established contracting or market spot rate, provide the best cost and required service optimization. That now requires shippers to be able to dynamically link supply chain planning with transportation and logistics contracting.

For carriers, the leveraging of advanced technology applied to a nationwide network of transportation demand and supply conditions predicated on time windows provides the basis of more dynamic pricing as well as capacity allocation options. Dynamic decisions that can allocate augmented capacity to one region because of revenue and profitability potential, likely come at the expense of availability within another region.

We purposely noted the term “common carrier” because it is an industry term that assumed that transportation would always be available at static published rates, and that carriers had an obligation to service specific regions. With more carriers deploying or leveraging network exchanges that provide predictive and descriptive analytics that can dynamically adjust capacity to certain areas of demand, static is no longer an operative descriptor.

In military jargon, an arms race implies that multiple nations have the sophistication and choices of how to best defend domestic security. In the “new normal” of business, it implies the sophistication of real-time decision making in securing logistics and transportation services. While carriers will more dynamically optimize their networks, manufacturers, retailers and wholesales need to dynamically synchronize customer order demand across manufacturing, logistics and transportation networks.

 

Bob Ferrari

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