Logistics Warehousing Trucking
Logistics Warehousing Trucking - Trucking and warehousing are two important components of supply chains and types of logistics service providers. They share similarities and differences in they are defined, competition, market pressures, and future directions.
Trucking is a broad term. There are, based on estimates, over 250,000 trucking companies. Most are medium-small enterprises. The for-hire segment includes many different types of firms and options, such as:
Truckload, general commodities less than truckload (LTL) Specialized ,flatbed, refrigerated / temperature control, bulk, household goods Dray Distribution / city delivery/parcel.
General commodity truckload and LTL are the two often-defined trucking segments. Issues such as driver shortages, fuel costs, and infrastructure shortcomings affect all for-hire transport providers.
The low cost of entry has made trucking a somewhat unique industry. LTL, depending on the delivery service niche, can have a higher capital cost with the fixed assets required to operate terminals.
The truckload market has large firms, such as Schneider, J.B. Hunt, and Swift. However, most are lesser-size companies. This is overall a market segment with limited brand identification. As a result, it is a commodity service, with price as the primary differentiator.
Despite that, the small size of many truckload firms has created merger and acquisition (M&A) interest, and activity as a growth tool. Investment firms have been interested in logistics, especially transportation, for investment opportunities.
LTL has evolved from a transcontinental business into being a regional one. The battle now is with the super-regionals, such as Estes, Old Dominion, and New England Motor Freight. Service reliability defines the regional market.
This can also be seen in the acquisition of regional LTL carriers by large firms such as Federal Express and UPS. FedEx’s and UPS’ activity places more pressure on smaller carriers.
Filling the cube of the trailer and reducing empty miles are still important for profitability in the trucking industry. Customer sales are done via traditional sales techniques, often as contracts with large accounts.
Also, freight brokerage firms have taken on more importance. Internet approaches, such as freightquote.com, have been successful in generating sales. Such methods though continue to put pressure on price as the primary differentiator among firms.
Branding and value creation are continuing to be elusive as tools to increasing market presence and, in turn, profitability. Technology for online shipment tracking and other applications adds to the costs of doing business, as does finding/training and retaining drivers, especially in the truckload sector.
Softening of freight volumes against the background of cost increases and service demands will increase pressure on carriers. In turn, this will increase the potential for additional M&A; and for carriers to develop additional capabilities.
Warehousing is characterized by medium-size commercial providers. However, large national 3PLs, such as Exel and APL Logistics, are how much warehousing is defined. Regional warehouses have played an up and down role as companies build national distribution networks to meet the service demands of large mass merchandisers and retailers.
However, supply chain disruptions, both real and the threat of, have created increased interest in regional warehouses.
As with trucking, general commodity and specialized commodity reflects how the market is segmented. Also filling the cube of the warehouse is important to profitability, along with high occupancy rates.
The future for both industries will not be easy. Large competitors see the small-medium enterprises, both the service providers and customers, as important to their growth. The reality of large firms being able to handle the needs of SME customers can be debated. Nevertheless, large firms can push their smaller competitors out of business in the effort.
3PL is an option for trucking companies and warehouse firms if done right and done well. It can create special service niches in a price-dominated, service-blurred industry. Developing a successful 3PL operation is not easy and takes different requirements than the core trucking or warehouse business. The challenge also is not to turn the 3PL into another commodity service where the price is the primary differentiator.
Another opportunity is with foreign firms looking to sell their products in the U.S. are other opportunities. These firms are not familiar with how U.S. transport is done and how U.S. customers require that their shipments, orders, and invoices be handled. Gaining foreign sales will mean working with non-traditional firms who have access to such potential customers.
Real supply chain management, with increased inventory velocity and compressed cycle time, is the elusive grail for logistics service providers.
This is especially true for providers who want to be important to leading-edge supply chain practitioners and to providers to firms that are lean and drive waste and time from their company and operations. Firms able to do this will lead to a dynamic change in trucking and warehousing.
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