By Jeff Berman / www.supplychain247.com / June 17th, 2016
It feels like the 3PL market is growing faster than the general marketplace, and brokers continue to offer the highly-fragmented contract carrier market with quality and flexibility that their customers really enjoy.
Logistics Management Group News Editor Jeff Berman recently caught up with Kevin Abbott, vice president North American Surface Transportation, Truckload at C.H.Robinson (pictured below).
In a wide-ranging interview focused mainly on the truckload brokerage market, Abbott and Berman talked about industry trends, volumes, technology, and pricing, among other topics.
A transcript of the interview follows below.
Jeff Berman: How would you describe the current state of the truckload brokerage market?
Kevin Abbott: Cyclically, demand is relatively soft and capacity is plentiful.
It seems like the customer routing guides are performing pretty well.
There is less transactional market volume out there.
From a secular perspective, it feels like the 3PL market is growing faster than the general marketplace, and brokers continue to offer the highly-fragmented contract carrier market with quality and flexibility that their customers really enjoy.
And we do so in a way that allows them to add that capacity without having to increase a lot of operational expenses.
Outsourcing is driving some of that and globalization and the increasing complexity of the supply chain are as well.
How do you view the market now compared to a year ago?
It is softer for sure and very capacity-rich, with some of that working its way into earnings results.
In terms of what is driving that, it has to do with softness in oil, retail is down, and that has resulted in high inventory levels, but it’s hard to think they have been at such a high level for so long now, going on several months now.
Over the last five years, there has been a lot of growth through acquisition, with companies taking theses steps to expand their reach. It is a crowded and competitive market that is not heavy on capacity at the moment. How does this situation impact the ways in which business is done?
I don’t know that the size of competition necessarily varies in the way that shippers act. I know the choices are different and better and more affordable.
But I don’t know how it really changes shipper communication, except that they are expecting more from us.
In what ways?
Customers are looking more near-time or real-time information, better quality data, and better quality service.
These are things we have done for a long time but we are pushing the envelope to increase expectations for our customers.
With capacity loose and the ELD mandate kicking in at the end of 2017, which is expected to tighten available capacity, what do brokers need to do in advance of that?
We are very perceptive in viewing the marketplace and able to react in one way or the other.
Our analysis of the ELD situation is that there may be a slight impact in equipment availability relative to that.
Looking at 2015 RoadCheck data, it shows that 5 percent of stops are in violation of logging. If only 5 percent of the capacity community is in violation of “cheating” on their logs, then that is not a huge impact.
In terms of managing your large carrier base (of nearly 70,000 carriers), from your perspective as a large broker as it applies to managing relationships within your carrier base? And what is the difference in managing relationships with smaller carriers and larger carriers?
The quality of relationships is what really shines through when we manage our carrier base.
There are large carriers that treat us very much like a shipper and are consistent in terms of giving us capacity throughout the year and don’t swing with the seasonality.
Those carriers get treated very well within our system…and those that may try to perhaps take advantage of us are more likely to be treated with less well through our programs.
It is more about how they react and move with us, rather than take advantage and kind of come and go.
When viewing the brokerage service component, a lot of it comes back to technology like sophisticated and highly functional TMS systems. IT is a major differentiator. How has the industry successfully leveraged that to its advantage?
It is a huge focus for us. We have a significant expenditure on IT resources on an annual basis to support our ERP program, our TMS, and our Web functionality to facilitate small and large customers and carriers.
We also have a handheld app that we developed and are using with our capacity community. It is definitely something we focus on internally and externally.
As we look at the spot market, rates and capacity are still on the low side. Are things changing as far as you can tell as we transition into the second half of 2016? How is the market behaving at this point?
DAT reported an uptick in pricing in May and that kind of coincides with the produce season in the Southeast and Southwest regions and the West Coast.
If I compare that bump to seasonal bumps from previous years in their data, it seems like a little bit less than it has been in recent years.
This seems to be consistent with the theme that capacity is pretty plentiful.
There has been a lot of talk about the “Uberization” of truckload freight, which is still in its early stages, with investments being made into these companies. How do you view this activity in terms of what it means to the market?
Critical mass is the component that those platforms lack at this point. I think the shipper community needs more than just a truck showing up.
They need some assurances in the form of the administrative components that go along with it. And I think that the technology needs to bridge the gap between the services the customers expect and that capacity it delivers.
I think it is a long way from being viable at this point.
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