On September 23rd, Logistics Management hosted a webinar at which time the co-authors of the annual Masters in Logistics study presented their major findings. For 25 years, this study has been gathering data from a large sample of shippers and carriers across various levels of spend and size. The three presenters, Karl B. Manrodt, Ph. D., Professor, Georgia College, Mary Holcomb, Ph. D., Professor, University of Tennessee and Tommy Barnes, President, Project 44, highlighted some major changes taking place in Freight Transportation.
E-Commerce is changing the Freight Spend Allocation across various Modes
In 2015, 21.9 percent of freight costs were spent on over the road truckload shipping while 21.7 percent were spent on LTL shipping. In 2016, these percentages declined to 17.8 percent for truckload and 15.0 percent LTL freight. Surface Parcel (i.e. FedEx Ground, UPS) increased year/year from 6.1 percent to 11.5 percent. Small parcel freight volumes increased by one percent. In another area of the study, the researchers revealed that 10 percent of freight shipments move from a DC direct to consumer while 21 percent now moves direct from a plant direct to consumer. This further reinforces the impact that E-Commerce and omni-channel marketing are having on freight activity.
Organization Structures are adapting to Market Dynamics
The authors highlighted how the management of freight transportation is evolving. Here are a few of the statistics that they shared in their webinar.
The data suggests that Transportation and Logistics play the leadership role in the preparation and execution of RFQs and RFPs but Purchasing and Procurement, with their negotiating expertise over a variety of commodities, are playing a larger role in carrier rate negotiations.
Shippers are making greater Use of Carrier Contracts to Manage Freight Transportation
In another area of the study, the researchers examined shippers’ views on their top priorities in managing freight. While the importance of customer satisfaction declined slightly from 26.9 percent in 2015 to 25.2 percent in 2016, maximizing profitability increased year/year from 20.8 percent to 24.9 percent. Reducing costs remained the top priority at 36.3 percent. The study identified some other changes that are taking place to keep costs under control.
When shippers were asked about using contracts to manage carriers, this jumped from 34.8 percent in 2015 to 40.9 percent in 2016. The percentage of shippers allowing their customers or suppliers to manage their freight dropped year/year 8.7 percent to 4.5 percent. The use of freight brokers and third party logistics to manage their freight increased very slightly from 2015 to 2016.
Conclusion
E Commerce is driving changes in how customers are served. Modal shifts are taking place and will likely continue to occur to best match the type of service to the customer requirement. To keep costs in line, shippers are refining their organizations to take advantage of the freight expertise of their Transportation/Logistics departments and the negotiating expertise of their purchasing/procurement specialists. To maintain or reduce costs, shippers are taking more control of their shipping, putting more carriers under contact and/or making increased use of freight brokers and logistics service providers.
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