What’s fueling the capacity crunch?

A combination of factors. Two issues are commonly cited including: 

  1. Driver shortage 
  2. ELD mandates

In addition, there are major macro trends including the rapid growth of e-commerce, which has shifted distribution models to meet changing consumer expectations, such as an increase of deliveries going directly to stores along with more urban and last mile deliveries. Infrastructure breakdowns and natural disasters that lead to traffic congestion, delays and extended shutdowns are also contributing to unstable market conditions.

Building a Competitive Strategy

This market represents a huge opportunity for LSPs to leverage their expertise and adopt technology that empowers them to serve their customers more effectively. While I heard from vendors that are offering new automated solutions to help address capacity challenges, there are three important requirements they are not currently factoring into their freight matching solutions.

  1. LSPs are Critical to Addressing the Capacity Crunch

Traditionally, shippers, have operated within their comfort zone, working with a fixed set of carriers where they have developed relationships. Shippers can manage 10s or maybe 100s of carriers at a time. With the current capacity crunch, shippers need an expanded set of carriers they can tap into. With thousands of carriers available, understanding their capabilities and performance levels is simply not practical to manage internally given that there may also be additional requirements around commodity, specific lanes, or equipment.

Because today’s market is more dynamic, it’s vital to be connected to a broader set of carriers. That’s where LSPs can play an important role. Their ability to access capacity from a large variety of carriers makes them a vital resource. In addition to extensive relationships, they bring deep expertise of carrier capabilities such as geographic experience, product knowledge and equipment requirements.

  1. Intelligent Freight Matching

Finding capacity in the current market is still largely a manual process. While emailing notifications to carriers and posting to load boards may be an improvement over time-consuming phone calls, it’s still not an optimal process. Ultimately, it’s simply automating a flawed process instead of using artificial intelligence to match loads with the best carrier.

Participation in LSP web portals and apps is limited and provides an incomplete view of their carrier network because there are too many for carriers to manage. Plus, traditional load boards often rely on carriers to enter their own data, which often results in incomplete, stale or invalid information that can lead to service risks and incorrect rates.

More sophisticated freight matching solutions provide access to verified data, the foundation of intelligent load matching. That information can include carrier strength by lane, geographic region, product expertise or special equipment needs. This allows brokers to quickly prioritize and select the top carriers best suited to transport each load and know which carrier to call first. Verified data can help ensure the most qualified carrier is on the load, and therefore reduce service failures.

Industry-leading freight matching solutions leverage new technology such as ELD and real-time tracking to know the location of carriers’ trucks with capacity and help determine which carrier wants the available load the most. They also provide a better understanding of market conditions and which loads will be tough to cover. 

  1. Data Privacy

Accurate, verifiable data is valuable. In fact, the value of an LSP’s carrier network is part of its competitive advantage. So, it’s understandable that LSPs and carriers are concerned about how, when and with whom they share their data. 

To encourage greater sharing of capacity data throughout the industry, LSPs and carriers need assurances that their data will be secure. Therefore, it’s important that digital freight matching solutions include measures to safeguard valuable information being shared.

One game-changing function in capacity matching is the ability to share data in a voluntary, secure private network. By co-opting in, LSPs can share their unused capacity data with key partners in the network, and in return get exponentially more, usable capacity information. The expanded access to actionable capacity data offers increased value to the network members while providing privacy and building trust.

Leveraging Innovative Technology

Next-generation digital freight matching solutions address issues currently challenging LSPs and carriers by empowering them to fix the broken process of finding capacity. Advanced technology enables freight brokers and 3PLs to make the sourcing/booking process more efficient and more intelligent by eliminating manual work and presenting verifiable data.  

In order to realize the greatest benefits, LSPs should consider digital freight matching solutions with tools to create an interconnected marketplace that leads to a more efficient and safer space to share capacity data.

Written by Brian Hodgson

Senior Vice President, Industry Strategy Product Management