In the world of logistics, global supply chains are put to the test with regular disruptions and volatility.
From skyrocketing fuel prices to the ongoing COVID-19 pandemic, all assumptions about future challenges are being questioned. The historical trends and data forecasting tactics of yesterday cannot be relied upon to navigate current market uncertainties.
Spot market rates are just the latest challenge fueling market uncertainties. Matthew Harding, senior vice president of data science at Transplace, noted the company identified nearly a 50% drop in spot volume across billions of annualized dollars in March alone.
Performance in the freight and logistics industry is profoundly affected by a company’s ability to sense conditions and execute the proper plans. Solutions like Transplace’s data insights play a large role in synthesizing key benchmarks from timely market conditions across a logistics platform. With accurate and timely cost and service benchmarks, supply chain professionals can quickly adapt.
We sat down with Matt to get his perspective on today’s environment and how companies are increasingly using real-time intelligence to mitigate the impacts of ever-changing supply and demand balances.
How have recent events changed how data is used to make accurate forecasts for transportation markets?
Traditional data sets, often based on government statistics or third-party providers, typically lag by 30 to 60 days. Large-scale surveys led by the government or universities are often conducted in the middle of a month, thus allowing the findings to be prepared for the following month – making the survey data at least 30 days old upon publishing. Despite these lags, these sources can still assist forecasting with established historical trends.
Transportation rate forecasting was fairly benign across the 2010s. Predicting bearish or bullish sentiment from carriers was as easy as tracking extreme shifts in Class 8 orders and then watching for the pullback in cancellations.
Other sources of macro intelligence such as ISM, Federal Reserve and BLS also provided good tracks on economic outcomes that all provide a basis of understanding for the leading indicators that impact prices. Soft markets were flat to 2%, normal was in the 3% range and anything higher than 5% was considered extreme. In the current market, we are seeing year-over-year rate changes of over 20%. The difficulty for forecasters is that the economy has had many significant shocks that when combined, render past forecasting approaches somewhat obsolete.
Given the difficulty in forecasting, and the fact that budgets and setting cost expectations are never going away, what is Transplace doing from a data perspective to assist its customers in the current environment?
There is no silver bullet. Every company has unique business strategies that drive different balances between cost, service and capacity expectations of their service providers. As such, changing market conditions change plans. We see combined knowledge of markets, benchmarks and key KPIs as the means to navigate these changing conditions, with a focus on four major areas for complex data sets.
First, shippers must have timely visibility of the market in a manner that supports strategic consideration. Shippers need specific visibility of market conditions through the lens of key KPIs, not just rates. When thinking of the market in terms of route guide performance, service levels, or order lead time, and industry-specific trends which are tracked weekly at Transplace can be much more useful than generalized sources.
Second, shippers must understand how they are performing and what is driving differences to market conditions. Trends may be helpful for communicating conditions to the c-suite in difficult markets, but how does this data align with strategy? For example, if a shipper has extremely short lead times relative to its peers, how does that align with their cost or transportation strategy in a tightening or softening market?
Third, shippers need to validate the alignment of internal and external partners in supporting measured outcomes. Are there significant differences in performance coming from internal operations or transportation providers? The focus should be on areas of business opportunity where control is secondary to cooperation and substantive information is needed to facilitate cooperation.
Fourth, there must be clarity and alignment on what KPIs will be measured and the cadence of reporting them. The right KPIs are crucial for driving execution and they help shippers understand where they have control, how they can impact positive outcomes and mitigate risk, and where corrective actions can be implemented to address unacceptable network degradation.
How does Transplace view data science in general and what do capabilities like Data Insights mean for your customers?
While data is extremely important, it is not actionable without our highly skilled domain experts who focus on developing high-performance networks for customers across major industry sectors. While some organizations perform one or two truckload bids per year, Transplace performs hundreds. We also provide engineering services that assess overall network structure and its effectiveness in terms of strategy, optionality of providers and sustainability. This work requires face-to-face interaction and/or complex tool configuration.
When it comes to bringing a wealth of knowledge and capabilities to an industry, I see data as a means for change. With the right judgment and expertise, it’s the bridge to a better, more adaptive future. I think all companies are striving to increase their data footprints, which will increase intelligence coming from data, and Transplace is at the forefront of that evolution with Data Insights.
With all the data flowing through the industry and the fact that our platform is a significant source of order-to-cash data flows, there is a huge opportunity to perfect what information should be analyzed and what should be ignored; this is key in developing a sound data-focused strategy.
Our goal is to help customers uncover and better understand opportunities, utilizing the following perspectives: what I (and my company) can control, what I am subject to (the market), and where partners can utilize data to support collaboration. Market volatility is not going away any time soon and it’s our responsibility to ensure our customers can be successful in any market situation.
Transplace provides businesses with industry-leading technology and actionable intelligence combined with a broad range of shared services that help deliver optimized networks enabling supply chain resiliency. To learn more visit its website.