While consumer spending changes resulting in surplus inventory, decreased container imports, higher fuel prices, and decreased freight volumes are just some of the numerous macroeconomic factors that exacerbated logistics issues this year, industry insiders say there are strategies third-party logistics (3PL) companies can employ to keep moving forward.
“Communication is key to everything with customers and our carriers,” said Tim McManamon, general manager at RCT Logistics, a Rocky River, Ohio-based 3PL company. “We strive to be transparent and to inform all on any updates.”
RCT Logistics — which provides full truckload, flatbed, over-dimensional, refrigerated, less-than-truckload (LTL), and international freight service — has been able to increase sales during some of the current challenges, McManamon told Transportation Today.
“We constantly update our customers of market changes. Being a 3PL we can flex to the market and cater to our customers’ requirements,” he explained. “Whether good or bad news, we are transparent in our communications with customers and carriers.”
In transportation, McManamon added, situations constantly occur, including weather delays, breakdowns, market updates, and natural disasters like hurricanes that can cause the market to flip in a day. “We help our customers navigate and understand the situation while providing solutions,” he said.
Effective communication is paramount, especially between employees and employers, according to Max Farrell, CEO and co-founder of Chattanooga, Tenn.-based software company WorkHound, an online platform that gathers feedback from the frontline workforce, focusing on supply chain industries such as logistics, warehousing, and trucking.
“Three years into a supply chain upended by COVID, driver feedback about logistics has really honed in on communication challenges,” Farrell wrote in an email. “Drivers want reassurance that their company has their best interests in mind and that they’ve planned ahead to ensure drivers have what they need.”
Farrell backed up his comments by pointing to this year’s Annual Driver Trends Report released by WorkHound that reported more than 58 percent of the comments about logistics were negative.
Common areas of concern among truck drivers include downtime, lost earning potential, slow freight, an inability to reach dispatchers on nights and weekends, disrespectful interaction with dispatchers, a lag in getting situations resolved, and bad information, Farrell noted.
“Drivers want to get from point A to point B in the most efficient way possible, so a lack of information or clarity around things like addresses or directions, wait times, policies, and procedures can lead to frustration — and turnover,” Farrell wrote, adding that he foresees a labor market defined by the larger theme of uncertainty.
“For example, our data shows that although 59 percent of driver feedback surrounding pay was negative, the majority of concerns were not about rates,” he explained.
Specifically, the WorkHound analysis of critical pay comments through the third-quarter of 2022 found that comments solely regarding pay only accounted for 26.6 percent, while logistics and communication issues as an extension of pay issues accounted for 34.3 percent of critical pay comments.
“Drivers are most concerned with asking questions or expressing frustrations with pay systems, wasted time, lack of work, and the communication around pay,” said Farrell. “If a driver is uncertain how and when they will get paid, frustration will mount and retention will suffer.”
Ryan Polakoff, president at Nexterus, a logistics management company headquartered in New Freedom, Pa., offered additional strategies.
“With decreased demand for transport services, freight transport companies may need to lower their rates to attract business,” Polakoff said.
And if there is a significant decrease in imports from a particular region or country, he said freight transport companies may need to adjust their shipping routes to focus on other regions where demand for transport services is higher.
“Some freight transport companies may need to switch transport modes to reduce costs and improve service,” added Polakoff.
Other strategies 3PL companies can use to increase business are to focus on cost savings for customers, according to Paul Bingham, director of Global Intelligence & Analytics and Transportation Consulting at S&P Global Market Intelligence.
“Effective freight transportation capacity is increasingly available and the decline in both spot and contract rates offers opportunity for 3PLs to leverage their expertise on behalf of customers,” Bingham said. “Carriers are more hungry for new business than in the previous few years, also providing opportunities for 3PLs to arrange compelling solutions for customers.”
RCT Logistics and Nexterus, for example, have put a premium on transparency and service.
“We’ve worked strategically with clientele and their customer and vendor networks to help analyze different operating scenarios, based on market volatility,” said Nexterus’ Polakoff. “By understanding what everyone’s “role in the game” is, small to mid-sized shippers have been better prepared to deal with the hand that’s been dealt by the market.”
3PLs also must resist the temptation to over-optimize for the current state and instead focus on the long-term, said John Piatek, vice president of consulting at GEP, a global supply chain and operations consulting company that also provides supply chain software and managed procurement and supply chain services.
“Investments into their core business, especially in technology to optimize their fleet uptime (efficiency) and other software that boosts operational visibility (like a control tower) will pay off,” Piatek wrote in an email. “3PLs need to pivot to longer-term agreements with guaranteed volumes.”