Transportation, specifically over-the-road (OTR) trucking, is one of the most significant business expenses for shippers of all sizes.
The benefit to improvements to this spend by adopting emerging best practices yields disproportionate improvements to the business.
The purpose of this white paper is to explain why business-to-business shippers today benefit from access to a neutral digital freight matching (DFM) platform to best use their available freight spend and human capital resources on behalf of their company.
The white paper also reinforces that transitioning to a DFM platform is one of the simplest and quickest payback initiatives any small, midsized, and enterprise shipper can complete in a matter of days to immediately realize the benefits.
DFM aims to leverage emerging technology to efficiently match Shipper demand (the need to move a product) with Carrier supply (truck capacity) via a digital (web and/or mobile) platform.
Most shippers recognize the strategic benefit of aggressive transportation spend management.
However, realizing and achieving are two different matters. Despite shippers’ best intentions, when factoring in both contract and spot freight spend, the daily undertaking to optimize a shipper’s transportation spend is incredibly challenging for every size of shipper for three fundamental reasons.
First, transportation is a huge industry. The US OTR transportation market is huge. According to the U.S. Department of Transportation (May 2019), the number of for-hire carriers on file with the Federal Motor Carrier Safety Administration totaled over 890,000 and private carriers totaled over 772,000. Of these, 97% operate fewer than 20 trucks. The Journal of Commerce estimates the total number of US freight brokers to number over 17,000.
Second, the OTR transportation industry is highly fragmented. According to a 2018 survey by the American Trucking Association (ATA), over-the-road trucks move over 75% of all domestic freight tonnage, and 70% and 60% of all US-Mexico and US-Canada trade, respectively. Trucking represents over 80% of the nation’s freight bill. While the 50 largest trucking companies account for 38% of the industry, it remains massively fragmented with high degrees of variability.
Third, transportation is highly volatile, changing daily based upon a complex combination of factors that include industries’ seasonality, cyclicality, weather and major weather events, and even geopolitical events. Many approaches taken by shippers are insufficiently ‘agile’ on a daily basis to analyze and leverage this volatility in real-time for financial benefit.
These three core issues (size, fragmentation, and volatility) combined with the consequential size of transportation expenses for many shippers create an exceeding challenging situation for shippers to efficiently optimize their entire daily freight spend.
The white paper also details the following contents:
