Large carriers investing more in technology than smaller fleets

Carriers have invested in technology to improve efficiencies across the supply chain and meet customer demand. However, larger carriers have been more apt to embrace technological improvements than smaller ones, according to a recent report.

FreightWaves and Vector recently released a report to show the industry outlook and to better understand emerging trends in trucking technology. The report, which included survey results from 318 respondents, is expected to be released annually to provide companies with benchmarks to which they can compare themselves. Respondents comprised operational employees from carriers of all sizes, and nearly half operate dry van, temperature-controlled or full truckload fleets.

The most prevalent industry challenges the respondents faced included driver retention and cash flow. The survey data was slightly skewed toward smaller carriers, and their biggest concerns included retention, cash flow and customer diversification. Driver retention was the top issue when the data is segmented by fleet size.

Recently, the driver shortage was ranked No. 1 on the annual top industry issues list from the American Transportation Research Institute, a nonprofit research organization of trade group American Trucking Associations. This was the fourth consecutive year the shortage was No. 1 on the list. The list is developed from a survey of 3,122 truck drivers, carriers and other industry stakeholders.

“For a number of reasons, 2020 has been a tremendously challenging one for our industry and our country, but as ATRI’s survey lays out, there are a number of issues we must address in addition to the ones put in front of us by this pandemic,” said ATA Chairman Randy Guillot. “From finding and keeping qualified drivers to the increased costs of insurance and burdens imposed on our industry by unwarranted lawsuits, ATRI has identified the issues our industry cares most about and outlines plans for how we can solve them.”

Carriers who respondent to the ATRI survey said driver retention was their No. 2 issue.

The ATRI survey aligns with the results from the FreightWaves survey, with driver-related issues at top of mind, the trucking technology report shows. A top concern for smaller carriers in the FreightWaves survey was diversifying their customer base, and this has been important amid the COVID-19 pandemic. Many non-essential businesses were shut down, but others, such as packaged goods and food, have outperformed. Small and mid-sized fleets were at greater risk of having non-diversified customer bases, making cash flow a more significant issue.

Large carriers, or those with more than 500 trucks, said technology challenges were some of their greatest concerns, following driver retention. Nearly half of the large carriers in the survey said refreshing technological infrastructure was among their biggest challenges. About the same amount said they were concerned with maximizing technology return on investment. Large carriers are more likely to complete technology upgrades because of their geographic and financial scale, the report shows.

Regardless of size, carriers don’t want to spend more than necessary on services. But some back-office costs don’t show up in the budget. Time spent on preparing and sending invoices contribute to these costs. Companies that switch to automated systems can reduce the cost to process an invoice by nearly 40%, according to the Institute of Finance and Management.

Overall, carriers in the FreightWaves survey expected to resolve their issues in the next six months. Mid-sized and large carriers were more confident than smaller carriers, but the thing standing in their way was the same: Not enough resources or room in the budget. Smaller carriers were more likely to note a lack of expertise and resource constraints. Issues such as evolving regulations are more difficult to overcome for smaller carriers, with tighter budgets and fewer staff.

Small carriers also have struggled to keep up with technology changes. Carriers with fewer than 50 trucks said they were not embracing technology. Less than half of small carriers in the survey said they operated with a transportation management system, the report shows. Small carriers comprise most of the capacity in the industry, and their inefficiencies can affect the entire industry, according to the report. Meanwhile, mid-sized and large carriers have benefited from the increased productivity from technological innovation.

Small carriers might see switching from manual processes to automated processes as expensive or time-consuming, but the long-term benefits are expected to be “impressive,” the report shows. PricewaterhouseCoopers (PwC) released a report in 2019 that shows technology was the most important factor determining the health of businesses in the transportation and logistics sector. The pandemic has accelerated the need for technology as carriers continue to perform their duties while remaining physically (socially) distant. Manual processes have been a challenge in the pandemic, and this includes bills-of-lading or proof-of-delivery. Mobile scanning solutions or automated billing have yet to become industry standards, the FreightWaves report shows. Most small and mid-sized carriers in the survey said they don’t use a mobile scanning solution. Only two-thirds of large carriers said they do.

In May, Lowell-based carrier J.B. Hunt Transport Services Inc. launched electronic bill of lading, allowing businesses and carriers to digitally sign bills of lading and reducing contact during the delivery process.

In a recent FreightWaves webinar, John Roberts, who has led J.B. Hunt as CEO for 10 years, spoke about the development of technology innovation and the challenges to implementing it. Roberts was joined in the webinar by Shelley Simpson, executive vice president, chief commercial officer and president of highway services for J.B. Hunt. Simpson said a 2014 white paper on the amount of waste in the supply chain was a launch point for the company to create its software platform, J.B. Hunt 360. The software could be used to improve efficiencies for all drivers, she noted.

Roberts said technology could be used as an advantage, not as a defense. However, technology is one of the most difficult things to manage. In 2015, J.B. Hunt hired Stuart Scott, chief information officer of Boston-based Tempur-Sealy International, to lead the carrier’s information technology department, which has since grown by 1,200 employees.

Roberts and Simpson also discussed an internal program that allowed employees to provide ideas to the leadership team. Employees have offered more than 20,000 ideas, and the company has approved more than 1,000 of them, many of which were technology-related ideas, Simpson said. Other ideas, such as the start of the carrier’s Final Mile Services segment, came about from a discussion with a customer, Whirlpool. Final mile regards the last leg of a shipment or the one that takes the product to the consumer. In the third quarter, revenue from the carrier’s Final Mile Services segment rose 22.2% to a record $182.09 million, from $148.98 million in the same period in 2019.

Roberts said to start thinking of the next idea before it’s needed. Another idea that came about from a customer interaction regarded the carrier’s 360box service. It is a trailer pool and drop-and-hook service for businesses and carriers. Carriers make offers to transport the trailers using Carrier 360 by J.B. Hunt, the company’s digital freight matching platform. The new service is expected to increase supply chain efficiencies.

In another FreightWaves webinar, Judy McReynolds, chairman, president and CEO of Fort Smith-based logistics company ArcBest, said it has done business digitally for over 20 years. ArcBest, the parent company of less-than-truckload carrier ABF Freight, has been focused on innovation, she said. The company has freight matching software and has been completing work without human intervention, she added.