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Material Handling Equipment

The Freight Recession: Three Ways a Logistics Partner Can Help You Succeed in an Uncertain Market

Posted by Mike Pallo

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In 2018, new truck orders broke records as carriers looked to increase capacity in response to the best bull market the industry had seen since the early 1980s. However, this growth spurt was short lived, as ELD mandates and an economic boost led to an increase in load volumes and falling tender rejection rates.

This over-capacity has decreased rates throughout 2019. Now, the market is in a freight recession, which is characterized by a combination of multi-quarter, consecutive drops in critical metrics like tender load volumes, tender rejections, spot rates, and market sentiment. So, how can shippers navigate these volatile waters?

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In times of uncertainty, working with a professional logistics partner can greatly reduce risk and provide the kind of support shippers need to capitalize in today’s environment. An effective third-party logistics provider can help you succeed by:

Re-Inventing Your Capacity Strategy

3PLs have vast carrier partner portfolios, and these relationships can complement your capacity strategy by enabling access to regional and niche carriers. Typically, these carriers master their narrow markets with long-tenured drivers that deliver very high asset utilization rates, allowing them to provide superior service at highly competitive rates. 3PLs can also help you to reduce your reliance on brokers by transitioning your organization to an asset-based core carrier program with a defined plan for managing volume fluctuations.

Offering Procurement Expertise and Technology

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Once your capacity strategy is defined, a proactive 3PL logistics partner will benchmark your rates to determine your position and execute competitive procurement events where appropriate. 3PLs leverage professional procurement resources with automated tools to facilitate a competitive multi-round bid, and back-end analytics often reduce the bid process by 30 to 60 days. With these technologies, 3PLs increase your speed to savings without imposing on scarce resources with shippers’ organizations, which may not always have the tools, experience, or carrier relationships that are required.

Reducing Transportation Costs

3PLs leverage transportation management system (TMS) technology to automate transactional tasks of tendering to the most economical carrier once you have launched your capacity strategy. TMS technology enables you to feel confident that shippers will be tended to the lowest-cost solution that meets the service requirement. With centralized and standardized operations in control, you can enjoy visibility into transit shipments and access to accurate and timely data. This combination of trust-worthy, real-time insights and a knowledgeable partner allows you to transform from a fire-fighting environment to a continuous improvement culture.

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As 2019 wraps and up and 2020 is on the horizon, it is more important than ever for shippers to adjust in this complex market. With a partner, organizations can successfully re-invent their capacity strategy and leverage new relationships. 3PLs can also provide the expertise and tools to make procurement more efficient, while also helping shippers to operate more efficiently and effectively. While the freight market will continue to fluctuate, the importance of finding the right logistics partner will remain a key element of success.

Topics: Transportation
Mike Pallo

Written by Mike Pallo

Mike Pallo serves as the Vice President of Transportation Sales at Kenco.

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