The state of the freight transportation services landscape is subject to massive volatility. This is especially true as the industry moves further into the busiest peak season in history. Since the onset of the pandemic, e-commerce has grown, amassing more than a decade’s growth within mere months.
Such an exponential growth is near-unsustainable. And that problem has become more evident through the container backlogs, inventory shortages, and continuing changes within the market.
Meanwhile, The Wall Street Journal reports, “domestic shipping rates for moving goods by road and rail in the U.S. are up about 23% this year from 2020.”
Failure to account for changes within the freight market will lead to missed opportunities and grave risks for shippers. However, the path to success through this and future disruptions rests with a data-driven approach that can combine the best platforms with real-time visibility.
To that end, this blog explores the TMS market expectations for 2022.
Expectations for Capacity and Freight Transportation Rates in 2022
The factors driving supply chain shortages are easy to understand. Finite capacity across all modes and uncertainty are pushing rates higher.
Rail transportation rates are still spiking
- According to the Association of American Railroads, forecasts for 2022 project a slight decline from the current indexed values of 112.4. That sounds like an improvement. However, it’s still nearly 10% higher than in 2017 and 8 points above the 2020 peak levels.
Both LTL and FT Transportation Rates Will Remain Higher
- As reported by Supply Chain Quarterly, 74% of truckers expect rates across LTL and FT to rise in 2022. Simultaneously, fuel surcharges are rising, and experts predict the tightest capacity crunch in generations will come in 2022.
Parcel Service Rates Are Also Moving Upward
- The major parcel carriers, FedEx and UPS, have rolled General Rate Increases (GRIs) near 4.9% in recent years. However, the unrelenting demands of e-commerce have created a new strain. In addition to the existing pandemic-influenced peak trucking rates, shippers must now face above-average GRIs. FedEx set GRIs to take effect that range from 5.9% to 7.9% depending on the zone, according to Intelligent Audit. UPS is following a similar trend.
Trucking Fuel Costs Are Expanding
- Trucking fuel costs also show a likely upward trend that will last through 2022. According to the U.S. Energy Information Agency (EIA), trucking fuel costs are $1.09-$1.43 higher than the week preceding Christmas 2020. Now, rates appear to be slipping a few cents week over week, but the overall trend is evident by this chart:
All Transportation Modes, Air and Ocean, Are Experiencing Shortages
- COVID-19 continues to impact both air and ocean freight capacity. According to Accenture, global international air cargo capacity increased 2% at the beginning of December 2020. However, the overall capacity is still 5% lower than in 2019. The Drewry Port Throughput Index is also changing rapidly. Following a deep dive in January 2020, container throughput is nearing 140 on the index. More troubling, the global 2-year change is up 4.1%
That trend is in tandem with record-setting ocean rates and turmoil over the Omicron variant. Therefore, shortages will likely continue. As another reminder, there are still dozens of ships anchored off the California shore. While they may be out of sight, they should be top-of-mind for shippers concerned about how the industry will evolve over 2022.
The Solution: TMS Advancements Will Create New Opportunities to Add Value
Creating more value in the supply chain depends on using an advanced TMS to improve operational efficiency. This is especially important as market dynamics remain in place. Less than two weeks ago, Central Freight Lines filed for Chapter 7 bankruptcy, putting the holiday freight plans of thousands of shippers at risk. FreightWaves reported additional increases in rejection rates in Chicago.
At the same time, an increase in the number of tendered and accepted freight in Memphis is occurring. Such changes reflect the ongoing pressure growth within the freight transportation services landscape. And shippers need to know a few things about how using a TMS can help.
TMS Users Look to End-to-End Controls for Improved Sustainability and Better Delivery Experiences
TMS users will look to gain visibility down to the last step of actual delivery, whether that’s at an in-store locker or working with a diverse group of couriers. TMS users — shippers, logistics service providers, and carriers — will collaboratively work on sustainability by utilizing optimization features guided by intelligence. This eliminates empty transit in all modes through the final, last delivery.
These logistics entities will further seek to unlock sustainable operations. They are putting operations to the ultimate test with more proactive, strategic, and data-driven tactical improvements. They show users what they need to do and why to pursue their goals, whether they face adverse weather or mounting regulations. Simultaneously, everything in the TMS will simplify operations and enable more process automation.
Automation Will Define the Future of the Supply Chain
Automation might be best described as the eventual automation of all activities and deliveries, including in-use, future-like capabilities using aerial drones for packages up to 5 pounds or autonomous trucks. These innovative advances are built on the ability and flexibility needed to handle capacity constraints and overcome driver shortages.
Meanwhile, automation will give rise to more participation from a larger swath of market participants. This puts enterprise-grade tools in the hands of companies of all sizes. In turn, it is democratizing the industry and reducing barriers to entry, enhancement, performance improvement, and meaningful gains in workflow efficiency.
Automation, Actionable Analytics, and End-to-End Visibility Support Efficient Operations
Automation naturally lends itself to the improved use of artificial intelligence, analytics, and machine learning.
These capabilities will continue to grow in importance and make it easier for supply chains to function with limited resources. Since people can spend less time worrying about whether they’re following the best path, an advanced TMS will put these functions to work. In doing so, it provides a way to create more high-impact work, reducing high-touch processes in tandem.
As for overall growth, there will be considerable ongoing interest in cloud-based management, including applying a central control tower and creating a new way to gain insight into all modes across both forward and reverse logistics.
In turn, this enables dynamic management of all activities. Using SaaS platforms, TMS users will seek new capabilities to interact with other industry players, trigger new events, and streamline logistics, democratizing the industry.
The TMS market will bring cybersecurity concerns to the forefront of every action, ensuring resources are readily accessible and fending off potential cyber-attacks. These advantages of control have a natural implication for building sustainability into everyday operations. Removing empty miles, optimizing space wherever it lies, and even using AI to reroute drivers in real-time makes the most of all freight transportation services while cutting carbon emissions.
Innovation Will Power New Modes of Transportation Service
There’s clear evidence that new transportation modes will come online as the industry evolves its standards of confidence and innovation within TMS platforms. Fundamental changes are necessary to avoid the pitfalls of increasing regulations, oversight, limited capacity, and challenges that no one can yet imagine.
It must all coincide with a stress-free, easy and understandable user experience that promotes around-the-clock visibility, instant access and actionability of data, and a truly tactical strategy that enables faster, more efficient freight transportation services management.
Such innovation is also reminiscent of Amazon’s advances in partnering with Rivian to increase electric vehicle use. As an aside, TMS vendors are actively working to ensure their platforms are future-ready. They need to be able to handle the emergence of more electric vehicles and the unique nuances they derive. Among these considerations: recharging stations and planning routes around those stations.
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Collaboration and Continued Visibility Are Essential
Technology advances come from the heightened demand for more visibility into all activities. These capabilities unified the TMS industry’s drive for efficiency and world-class service in a truly omnimodal vision that lends itself to increased sustainability. That has now combined to create an all-encompassing reach in the best platforms to propel growth for individual companies and their customer base.
Collaboration and network partnerships are integral to today’s supply chain. The best systems carry a universal-like infrastructure to accommodate growth or consolidate different services to create more network access to both the spot and contract market.
Delivering a more robust, more resilient supply chain depends on the flexibility to incorporate new technologies into changing workflows. Such flexibility must be on full display with various functionalities, including visibility, planning, management, execution, intelligence, and settlement.
Shippers need to recognize the simple reality that rising transportation costs will last well into 2022. Even worse, there is a risk that the freight transportation services rates will grow significantly worse as the omicron COVID-19 variant spreads. And that will be combined with the consolidation within the industry to drive rates across parcel, truckload, LTL, ocean, air, and intermodal/rail.
Using a TMS is key to overcoming these disruptions in the freight market throughout 2022. Connect with MercuryGate to learn more about how your organization can stay future-ready now.
One Response
Thanks for explaining that business expansions can be helped a lot by freight services. I plan to look for such services soon because I’d like to weigh out my options for my business someday. Aiming for expansion surely is something to keep in mind.