Freight Vision 2020: Pressure on Rates, Bankruptcies, Regulations Anticipated as Major Challenges

This is the first installment of a 4-part series that provides perspectives from TMSA members on predictions for freight transportation in 2020 – and the impact Marketing and Sales can have on overall business success.

One of the big challenges is downward pricing pressure on freight transportation while service demands continue to increase, suggests Crystal Lahr, Sales Director for ATS, a Minnesota-based provider of over-the-road highway, maritime, projects and logistics services. Lahr serves on TMSA’s Sales Advisory Council. “Brokerage relies heavily on small to midsize carriers for capacity and the pricing pressure along with rising driver wages, equipment costs, insurance costs, etc. is straining carrier’s business” Lahr says. “Because of that, we anticipate we will continue to see carriers struggling in the marketplace throughout 2020 until there is a pivot in freight rates in a positive direction.”

A solution to this challenge? Lahr suggests that third parties will need to continue to create and enhance carrier relationships to properly source capacity to meet shippers’ expectations. Investing in technology that aides in building and expanding carrier connections will enhance service and speed of communication.  Also, utilizing data analytics and artificial intelligence (AI) to provide predictive communication, increased efficiencies, pricing and planning with shippers and carriers alike will become the expectation from a service level in the future. 

Directly impacting pricing pressure is capacity – and capacity will continue to be an issue for all sides of the industry, says Leah Fenech, Vice President of Sales for Intelligent Logistics, a provider of full truckload transportation brokerage, freight forwarding, and distribution and intra-Texas trucking services. Fenech also serves on TMSA’s Sales Advisory Council.

An obvious long-term solution for ground freight would be movement to driverless vehicles faster than market projections, and this will be a good option for local or regional services, suggests Fenech. “However, the road infrastructure challenges in the U.S., coupled lack of needed support services, will prevent that solution from being available for cross-country moves in the near future.”

In the interim, shippers will be in competition for space on the remaining carriers, and positioning as a “preferred shipper” can help to improve their success with movement of cargo, suggests Fenech. “This means strict adherence to agreed payment terms, taking extra care when packaging cargo for lower damage risk ratios, and adopting a partner oriented approach to relationships with strategic carriers/suppliers. We are no longer in a buyer’s market.”

“The fallout from recent bankruptcies of large carriers will tighten the ground transport industry even further,” says Fenech. “The downsizing of many other fleet carriers will affect the new employment ability of displaced drivers in the 45 to 60 age group. This, combined with lack of interest from younger candidates will serve to make drivers aged 30 to 45 in high demand and inclined to job hop for pay opportunities, driving costs to shippers up.”

In addition, air freight will continue to be impacted by downsized fleets, heightened security procedures, and fewer all-cargo routing options, notes Fenech. “The ocean industry is shrinking due to alliances of steamship groups and growing regulations related to fuel and cargo weight capacity,” she continues. “Again, the effect will be rising shipper costs.”

Another challenge is that the industry as a whole is facing digital and operational disruption as it increases efficiency and begins to serve the strategies and needs of the downstream consumer in both the B2B and B2C space, says Jason Ickert, Manager of Integrated Logistics for Energy Transportation Group and Chairperson of TMSA’s Membership Committee.

“At the same time, the industry is weighing the impact of administrative regulations (FMCSA’s Drug & Alcohol Clearinghouse, IMO 2020, Carbon Tax, Trade Policies and Tariffs), while struggling to keep ahead of their competitors in their space, and exit each fiscal year profitably,” says Ickert.

“Administrative regulations will be perpetually enacted in to promote safety; personal, public, environment or otherwise,” continues Ickert. “As leaders, we have to diligently advocate for our industry to our lawmakers and agency leaders by providing them impact studies and statements relative to laws they plan to enact. At the same time, we need to improve our skill sets and grow our expertise in running a profitable logistics organization.”