The Future is Managed Freight!
Logistics as a Service
Reading the most recent publication of the Morgan Stanley Truckload Sentiment Survey, I was struck by a comment from a shipper in the “Respondent Commentary” section. “Soft. Locking in new lower contract rates. Concern is if this is the bottom, can brokers honor these rates for the next 12 months.”
This comment indicates to me that at least some shippers are beginning to recognize that we seem to be at or near the bottom of the current cycle. Furthermore, shippers are realizing that the rates currently delivered via RFP/RFQ reflect our current position in this cycle and are not an accurate representation of the freight market over the next year. Given these observations, there’s an excellent chance that these rates will not be honored through the entirety of the bid period.
The current methodology seems to be broken, but does a better method exist? I believe there is if we combine the service offerings of Logistics as a Service and the possibility of reducing rate volatility with Freight Futures.
Logistics as a Service (LaaS) provides predictability and consistency. Michael’s recent blog post offers a discussion of the merits of outsourcing the analytical, governmental/regulatory, sourcing, and technological expertise necessary for a modern logistics department. When shippers move to LaaS, they can expect cost savings and increased efficiency.
Freight Futures, although relatively new, offer shippers the ability to reduce the inherent volatility of the freight markets. By hedging risk and reducing the pain of massive swings in spot market prices like those we saw in 2018, shippers can assess more accurate freight spend estimates rather than “guesstimates” based on where the market is now rather than where it will be in six to 12 months. (Not to mention the added costs associated with rolling through a routing guide once volatility hits.)
LaaS equips you with a team of experts that has your back, fighting to secure for you the best capacity at the lowest possible cost while retaining high service levels. Investing in Freight Futures reduces freight market volatility and provides your team the ability to accurately forecast freight spend. Together, they deliver an improved method of getting your products to your customers on time and at the right price.