The CSCMP issued its annual “State of Logistics Report” which insistently urged shippers to take immediate action on deployment of automation technologies like TMS, optimizers, YMS and other logistics IT solutions. The case for striking at this particular moment couldn’t be stronger. Here’s the compelling evidence offered by the CSCMP report in support of this position.
US business logistics spending was up by 2.6% in 2015, while at the same time five key issues favorable to shippers are manifesting in the transportation market today. According to A.T. Kearney’s Sean Monahan who wrote the CSCMP report the five major issues for transportation logistics in 2016 are
- Energy – wherein attractively low fuel prices yield savings;
- Capacity – wherein the shortages of the last few years have largely eased lowering rates;
- Inventories – wherein levels have increased steadily since 2009 as low interest rates make it cheaper to carry;
- Efficiency Improvements – wherein technology continues to increase operational efficacy;
- eCommerce – wherein technology continues to lead retail sales growth;
The data correlating to these five key issues strongly suggests shippers are in a strong position to absorb the CapEx required to implement an automation technology like today’s affordable Cloud-based TMS platforms. Monahan points to the dramatic 15% drop in spot market rates in Q3-Q4 of 2015 as one point of evidence of the falling transportation costs for shippers. Adding to this are the estimated 80,000 surplus class 8 trucks Penske projects will be available over the coming 12 months and the current soft freight market which has been easing the driver shortage. Taken together with low fuel prices, trucking costs are significantly lower today than they were a year ago.
“An ideal business climate would include rapid adoption of new technologies that give shippers and their logistics providers immediate information on freight location and possible transportation difficulties, as well as widespread information on capacity options and pricing.”
Monahan remarked, “While economic and carrier conditions are expected to continue favoring the ‘shippers’ market’ for the next six months, a realignment of factors – including capacity, inventories, interest rates and economic growth – are projected to result in moderately higher transportation rates in 2017.” The six month period represents the perfect amount of time for a shipping organization to implement a new logistics IT solution, and the savings they’re currently capturing in the abovementioned areas should be more than adequate to cover the modest costs of a SaaS solution.
According to an article in Transport Topics, “Monahan also said transportation executives doing strategic planning should consider both the pace of technological change and operational constraints. His description of an ideal business climate would include rapid adoption of new technologies that give shippers and their logistics providers immediate information on freight location and possible transportation difficulties, as well as widespread information on capacity options and pricing. He describes the current business climate as combining regulators that are ‘business friendly and rational’ yet transportation automation is improving at an incremental pace.”
Sometimes the environment is ripe for decisive action. This is one such time. Shippers won’t soon see another environment so favorable to the engagement of logistics IT solutions and the steps they take in this regard today will only serve to strengthen their competitive ability when the environment ultimately sours.