IBM’s rescue from the brink of collapse in the early 1990s to global technology leader today is generally credited to its leadership’s ability to pivot and make major changes to its established businesses – primarily from a focus on hardware to software, cloud computing and services.
But technology is surprisingly not the only driver in IBM’s renaissance.
Often overlooked in this metamorphosis from incumbent trailer to leader was then-CEO Lou Gerstner’s identification of the need for a cultural change: leveraging IBM’s organizational and technological talents towards exceptional customer experience (CX).
IBM’s three keys to delivering great CX were:
- Understanding what customers want
- Making the business customer-centric, and
- Using digital tools to help deliver great customer experience.
What does the oldest company on the top ten global technology companies have to do with freight?
Here’s What This Has To Do With Freight
The transformation of a tech giant and the freight industry’s current process of digitization share some key principles: whether selling AI tools and consulting or freight, the ability to adopt new technologies by listening to what customers want can be key to any transformation.
The digitization of the freight industry is about improving speed and efficiency.
But at its core it is providing a simplified, frictionless and transparent experience to shippers.
This trend moved forward in exciting ways in 2019. For example:
- CH Robinson launched Freightquote – This platform takes aim at SMBs enabling simple online search and e-booking across multiple US trucking carriers.
- DB Schenker rolled out Connect 4.0 – allowing customers online multimodal search, and even booking and tracking across land, air and ocean.
- Among carriers, Hapag-Lloyd added Navigator, a real-time tracking and alerts platform to complement its QuickQuotes offering.
All of these are steps to improve the customer experience of shipping freight, and remove the legacy frictions that could slow down the process in the past. Critically, these are all offered by legacy incumbents intent on offering a phenomenal customer experience. Sound familiar?
But how extensive have these steps to digitize been across the 3PL industry, and how much has the shipping customer experience changed as a result?
This year’s Freightos mystery shopper study looked to answer these questions.
Keep reading for the highlights OR
About the Research
In the study we looked to online spot quoting as a proxy for the overall digitization of the industry as it’s often a shipper’s first encounter with forwarders. Also, the ability to get key information quickly, easily and reliably is a pillar of 21st century digitization and may say a lot, not only about what tools have now become available, but how they’re being leveraged to deliver a truly digital customer experience.
We mystery shopped the twenty largest freight forwarders for FCL, LCL and air online quotes. We also surveyed eight digital freight forwarders and the five largest ocean carriers for FCL quotes to get a sense of the growing competition that forwarders are facing and how these compare in their digitization efforts.
Online Requests for Quotes (RFQs)
For small and midsize importers, the customer journey almost always starts with a freight quote. So the first thing we wanted to see was how easily an RFQ could be submitted online.
The results show progress over previous years, with nearly all forwarders providing an online form (90% compared to 70% in 2015). Most were easy to find, and some forms, like those provided by DB Schenker, CEVA, and Kuehne+ Nagel, featured search and filter options that let shippers sort by price or duration and get very exact for their quote request.
But What Happens After the RFQ?
Next we looked at how forwarders responded to these requests. Here there was also progress, but still significant room for improvement.
There was a much higher rate of forwarders providing instant quotes (15% compared to none in 2015 and 5% in 2017) – a true mark of digitized pricing and processes.
Forwarders also sent more responses within 24 hours than in the past, pointing to digitized rate management being used internally. But 18% of all requests were provided with quotes manually, taking an average of 122 hours and as much as 19 days – definitely slower than most shippers’ desired pace of business!
But perhaps worse was the majority (60%) of requests that were just ignored, leaving hot leads and interested customers to go elsewhere and indicating that the importance of customer experience in digital channels is not yet appreciated.
Threat from Carriers and Digital Freight Forwarders?
In the mid-’90s, IBM wasn’t living in a bubble. Neither are freight forwarders.
When we looked at carriers, we found that the top carriers are getting serious about digitization. Several are rolling out new shipper-facing products and doing somewhat better in taking steps to reach shippers directly with 40% of carriers offering instant quotes, compared with only 15% of freight forwarders quotes.
Digital forwarders are likewise seeking to be customer-centric and doing somewhat better than traditional forwarders with 25% offering instant quotes. Both of these groups are showing progress and seeking to pose a threat to traditional freight forwarding, but likewise still have a way to go.
Customer Experience Matters for B2B. More than You Think.
A recent Salesforce study found that B2B buyers: consider customer experience very important (even more so than consumers); can be won by great service; and expect technology and innovation to play a key role in delivering it.
The advances in digitization of the past year are encouraging, but suggest that the industry doesn’t fully appreciate the importance of customer experience and how digitization can help deliver it.
As in the example of IBM, the difference will be which players are able to listen to what customers want, pivot to deliver, and leverage the available tools to provide a smooth, reliable, and transparent customer experience.
To see in-depth where all this is going and in what ways digitization will enable customer-centric freight download the full report here.
Stormy weather hitting two US regions this weekend (with forecast video)
The last weekend of May will be a bit dicey for truckers in parts of the Northeast and Northwest as the weather turns quite stormy.
A strong cold front will move through the eastern United States later today, triggering thunderstorms from the Great Lakes to the Northeast. Some storms could become severe late this afternoon and evening from West Virginia and northern Virginia all the way to upstate portions of New York and Vermont.
These severe storms could produce scattered areas of large hail and intense wind gusts, as well as localized flash flooding and isolated tornadoes.
The National Weather Service (NWS) considers a storm severe if it produce any of the following based on radar data or an observation from the field:
• Winds of at least 58 mph
• Hail at least 1 inch in diameter
• A tornado
Severe weather could hit places such as Charlottesville, Virgina; Morgantown, West Virginia; Baltimore, Mayland; Washington, D.C.; most of Pennsylvania; most of upstate New York, including Albany, Buffalo and Rochester; and Montpelier, Vermont.
Severe weather may delay drivers heading to the key freight markets of Harrisburg and Allentown, Pennsylvania to pick up loads.
The latest FreightWaves data, updated this morning, shows these two markets are in the top 10 for outbound volume. In other words, there is a large amount of freight available that has been offered by shippers.
Harrisburg and Allentown rank fourth and eighth, respectively, in terms of their Outbound Tender Market Share (OTMS). Combined, they account for almost 5.5% of the nation’s outbound freight. Drivers heading to these areas should expect mostly minor/short-term delays due to the potential for severe thunderstorms and roadblocks.
Other weekend weather
Crosswinds in southern California will become hazardous Friday and Saturday. Gusts will reach 45 to 50 mph along sections of Interstate 5 and State Route 99 from Fresno to Bakersfield. Drivers deadheading or carrying light loads should be extra careful.
Heavy rain will soak parts of the I-5 corridor from northern California to Seattle from late Friday night through Saturday. Severe thunderstorms will hit areas of Oregon and Washington, mostly east of I-5, affecting areas along I-82, I-84 and I-90. Light to moderate rainfall will continue Sunday, with areas of freezing rain and snowfall possible in the Cascades as cold air enters the mid-levels of the storm system.
Have a great day! Please stay healthy and be careful out there!
Commentary: Making a tough best guess market forecast
The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.
Forecasting is hard enough to do when you have accurate and timely data. It’s almost impossible when your data is not up-to-date.
There is an old adage: Forecasting is like driving blindfolded while your partner looks rearward and telegraphs the next turn based on what you recently passed. That is tough to do on a curved road. It is mpossible on a road never taken.
Railroad freight is a derived demand economic function because cargo moves when there is a market demand.
Who sets the demand? It’s typically the receivers that set the demand table. Yes, the critical mass to projecting a forward business volume is the buyers.
A map highlighting the delivery geography is the prime intelligence source for almost all freight forecasting.
In practice, one must examine both the origin and destination together with the alternate transit paths. There is complexity. Sometimes there is a middleman that changes the scope and the path and the timing of cargo movements.
A fuel change and a market slowdown or a price drop in certain commodities can also change the path and the chosen freight carrier mode.
Thinking about railway freight specifically, let’s briefly consider the essential planning factors that will influence the outlook for the remaining weeks in the second quarter of 2020.
The setup for rail freight is that it moves bulk cargo and industrial cargo. That covers the core rail carload sector. Carload traffic volume is more profitable on a per railcar revenue basis and much larger as a percentage of cargo relative to intermodal traffic (trailers and containers on trains).
If we just focus on intermodal rail, we miss the heart of the still extremely profitable carload freight business model that drives the seven big Class 1 railroad companies.
Here is a simple profile of where the railroads most hope to preserve or to grow their 2020 business volume. These commodity sectors are important because they are where the money is for a strong financial result.
What’s the official railroad company traffic volume and return to volume growth outlooks?
Collectively, they are very silent. None are effectively telegraphing the next turns ahead. In investor relations terms it means eliminating their “forward guidance.”
Here is a sample of the non-forecasting language:
CSX withdrew its guidance for the rest of the year. Why? It is “too wide to predict at this time” according to the company’s president and chief executive officer.
Kansas City Southern has withdrawn its previous full-year earnings forecast. It is also reducing its 2020 capital expenditures by about 10% from the original target of ~$500 million. That might drop later by a full 20% depending upon evolving conditions.
Norfolk Southern Corp. withdrew its previous outlook for flat full-year revenue. It has not yet signaled how much its second quarter 2020 volumes will decline. Instead, it has signaled a so-called “doubling down” on lowering its structural costs as a means of driving profits. That suggests a financial outlook rather than a marketing message.
In railroad freight messages, the choice of metrics and the wording of the messages about their companies’ futures often emphasizes the financial scorecard. Customers and volume growth are not emphasized in the wording.
The anticipated pivot towards traffic volume growth and capture of trucking market share is hard to discern.
If the industry internally isn’t clear, that leaves us with speculation. My sources tend to be railroad customers and what they are broadly saying and doing about the next few months of the business.
We must interpret from the customer side without a direct contact to the changing railroad metrics.
True, we can examine broad system-wide reported traffic data for multiple commodity types. That data is published weekly.
But it is difficult to see the data in terms of changing market to market origin and destination corridor flows. The geography of rail freight transport is somewhat blind.
We can see trucking traffic by geography in near real-time, but not the rail carload volumes. The only way to do that is to use inferential modeling and secondary reporting access data such as from port records.
The problem is that there is a data capture lag time.
Remember our road trip partner in the car? This is like asking for the next turn ahead when she or he hasn’t seen the road behind yet.
Here are examples of what the outside market is seeing. It remains troubling; there is not much buoyancy.
How will intermodal rail play in the second quarter? Here are a few informed views.
With five weeks to go until the end of June, what’s the rail freight call?
In broad terms, here are separate volume numbers for intermodal and carload. It assumes a tepid U.S. economic recovery out over about six weeks.
Intermodal likely continues to show much slower returning traffic growth than expectations for the trucking sector. The primary reason is that intermodal does not carry much e-commerce merchandise. In addition, the possible return of the retail economy will be primarily truckload based because of speed and reliability.
Domestic intermodal is still 10 to 15% below that of June 2019, while international intermodal is still down 18% or more below June 2019.
Here is an independent view of the intermodal outlook as shared by FTR’s Eric Starks and colleagues. We might not yet be in the so-called restart of the railroad-served economic recovery phase yet. This data view as of May 13th.
How bad is this visually? Check out the FTR plotted trend of current early May data versus the five-year plotted intermodal volume. Intermodal volume might still fall further year-over-year in this four-week average plot out to just beyond week 26. We will have a sharper view in about four weeks.
Carload freight is likely to see much larger variances in traffic volume decreases than intermodal.
Canadian traffic will see a somewhat different pattern, perhaps a bit better in volume than that across the U.S. rail network.
Mexican railroad traffic will, like that of the U.S., see a negative impact largely related to the fortunes of how many new cars the automakers build and ship to their dealers. This is part of the market demand hypothesis being found at the delivery end rather than the origin.
Humbly, this is my offered level of confidence as to the total second quarter volumes:
The end of the third quarter outlook is less certain. There are some optimists that should not be ignored.
Roy Blanchard closely follows the Class 1 railroad and shoreline carload business sector. He likes the UBS Global Research contrary focus.
Their three-part counter is simple. Investor sentiment has rarely been this depressed. While a bearish sentiment is over 50% in some surveys, there may be a sign of a rebound underway. For example, the CRB Commodity Index has “stabilized.” Maybe.
Lumber prices have retraced almost 50% of their COVID-induced decline. Does this reflect the gradual re-opening of the U.S. economy or rather a sort of desperate pricing for cash flow by sellers?
If stimulus payments by the federal government work as some suggest, then we might indeed see a rebound in cyclical sectors like energy, materials and industrials.
What’s your expectation?
Meanwhile, who within the railroad carrier sector will survive and who might stumble?
For the Class 1 railroads, there is an optimism that they will demonstrate resiliency in financial terms. Positive net cash flow from a somewhat less efficient productivity but still perhaps in the high 60s to at worst very low 70s “operating ratio level” will mark a second quarter success for investors.
It appears that North American railway freight will remain the most profitable of the freight modes entering the summer.
This economist’s confidence level is about 95% or better for financial health.
Some short lines that specialize in selected commodities as their core regional business may stumble in both volume and in their reported second quarter accounting. Clearly this pandemic is a market test.
Here is the broader rail-centric outlook for a year from now (the second quarter of 2021).
Intermodal volume across the USA – likely down as much as 23%. The eastern short-haul rail lines may possibly be down even more – in the range of 26%.
The single market commodity that is a huge waiting opportunity is grain. In contrast, crude oil, fracking sand and coal are challenges as their markets continue to morph.
Chemicals and petrochemicals like plastics are still a good bet for rail traffic gains over the next decade. Auto traffic will grow again if the travel industry and the disposable income of the American consumer can recover at a reasonable pace.
If Congress and the Trump administration can reach a political resolution that results in safety-related modernization of roads and bridges, that should spur primary metals- and aggregates-related growth for the railroads. But this remains a big “if” scenario.
As for the continuing shift in market share from railroads to trucking, that’s not really a pandemic issue. It is a business issue.
It’s going to be decided largely in the halls of each of the separate Class 1 railroads. If the large railroads decide to share their productivity gains from the recent precision scheduled railroading business change – as they did four decades ago from productivity gains of the Staggers Act, then competitive pricing should shift railroad demand-side customers (the receivers) back to using more rail services.
When we see that cost savings sharing occurs, my level of confidence as the volume and share pivot will be in the high 90s. That is my market view.
Despite all of these expert opinions, you the reader have to make a judgment. The best strategy is a reasonable high to low range – and then pray for a market migration “to the mean.”
Best forecast bet? That we are blessed by a combination of herd immunity and a successful vaccine.
More air cargo finds its sea legs during COVID-19
Escalating airfreight transportation rates and capacity shortages out of China in recent months due to the coronavirus pandemic have led many shippers to try hybrid services that combine sea and air modes.
So-called “sea-air” services offered by some global freight forwarders and non-vessel-operating common carriers (NVOCCs) have been around for decades, but they tend to come and go depending on airfreight market conditions.
The pandemic has spawned increased interest in moving freight from Asia by fast boat to Los Angeles where it is put on a plane to Europe. The new option has become more popular than the traditional routing through the Middle East, which involved an ocean leg to the United Arab Emirates’ Jebel Ali seaport, stripping the container and delivering the cargo to an airliner at the Dubai airport for transport to the destination city, according to logistics professionals.
“Sea-air is a reaction to lack of capacity and high rates,” said Morten Bach, global chief commercial officer for Shipco, a non-vessel carrier in Hoboken, New Jersey. “When air rates go up, sea-air becomes a viable alternative for cargo that cannot pay high airfreight rates, nor accept all-ocean transit times.”
Experts caution that not all freight is suited for the sea-air mix because of tight delivery windows and more touch points that increase the risk of delays, such as extra customs inspections.
L.A. sea-air service throughput
The COVID-19 pandemic has turned Los Angeles into a center for sea-air logistics services.
Ocean consolidator ECU Worldwide earlier this year established a sea-air service from China to Europe via Los Angeles, called XLERATE. Less-than-containerload (LCL) shipments booked by forwarders are moved via ocean carrier from six Chinese ports to Los Angeles, for devanning and placement onto airplanes bound for Europe.
“We are targeting airfreight users and really not trying to convert our standard LCL clients to XLERATE per se. The commercial benefits are allowing our freight forwarding customers to give their “clients a third or middle service option both in price and transit between pure air cargo out of China and the standard ocean LCL service,” Tim Tudor, ECU Worldwide’s Miami-based CEO said.
Transit times are between 14 to 23 days, depending on the Chinese origin port and the destination European airport, while the cost is about one-fourth that of pure airfreight.
After devanning containers and reloading the cargo onto airline pallets at its facility in Los Angeles, Shipco turns the freight over to all-cargo operator Cargolux for air transport to Europe.
Both ocean wholesalers credit the success of their L.A. sea-air service to trans-Pacific, U.S.-flag ocean carriers Matson Navigation (NYSE: MATX) and APL, a subsidiary of French line CMA CGM, which operate scheduled container service from China and North Asia to the Port of Los Angeles.
While other trans-Pacific liner carriers have announced numerous blank sailings during the COVID-19 pandemic, Matson has even added chartered vessels to increase its capacity to two sailings per week, according to Tudor. For Asia origins that are not served by Matson, ECU Worldwide uses APL’s “Gate Out” service.
“We are most certainly focused on knowing when these blank sailings will occur and adjust our schedule accordingly,” Tudor said.
Central and South America
Both ECU Worldwide and Shipco said they also have expanded their sea-air services via Los Angeles to include destinations across Central and South America. They perform this by trucking the cargo to Miami International Airport for outbound flights to those regions.
Shipco operates team trucks seven days a week to Miami.
“It is an advantage for us that we are a truck broker in the U.S. and can control the trucking leg into Miami ourselves via our in-house domestic department to ensure we can deliver on the competitive transit times,” Bach said.
The ocean consolidators are also providing sea-air services for large container shipments of personal protective equipment for hospitals, which initially relied on express air to cover immediate supply shortages.
“We have moved several sea-air shipments well over 80 cubic meters from Shanghai to . . . Munich and Madrid recently,” said Spencer Strader, ECU Worldwide’s director of U.S. imports. “We have been moving weekly shipments in the 40- to 50-cubic meter range of PPE from Shanghai and Shenzhen to Buenos Aires, Argentina, and Bogota, Colombia, via Miami.”
Personal protective equipment, or PPE, is worn to minimize exposure to hazards such as viruses.
Minneapolis-based forwarder C.H. Robinson Worldwide (NASDAQ: CHRW) has also helped Asian shippers turn to sea-air transport for their U.S.-bound shipments.
“We’re working closely with them to understand their current inventory levels and determine if expedited ocean services to the U.S. and domestic air to various U.S. states will work with their timeline,” said Matt Castle, C.H. Robinson’s vice president of global forwarding products and services. “With the right planning, global shippers can accommodate the longer lead time and take advantage of the cost savings.”
DSV Panalpina (OTCMKTS: DSDVY), based in Germany, has experienced greater interest in its sea-air service to Europe via Singapore and Dubai.
“At the beginning of the year – before Chinese New Year – we experienced an increase in demand for this service from markets such as Bangladesh, Myanmar and Cambodia due to a surge in textile volumes,” DSV Panalpina spokesman Christian Krogslund told American Shipper.
“As the COVID-19 pandemic unfolded late in the first quarter, demand shifted towards mainly PPE,” he said. “In order to keep supply chains flowing with vital PPE for the fight against COVID-19, we have used transshipment points such as South Korea, Taiwan and even Vietnam to meet the huge demand for capacity out of China.”
Shipco COO Kim Ekstroem said experienced logistics providers can establish new sea-air routes on demand.
When airfreight capacity to China suddenly tightened at the start of the pandemic, Shipco established a sea-air solution through Inchon, South Korea. Cargo arrived via aircraft at Inchon and was reloaded into ocean containers for transport to Shanghai.
“We got down to a transit time of roughly seven days,” Ekstroem said. However, he added, the service only lasted until the outbreak subsided in China.
Sustaining sea-air services post-COVID-19
ECU Worldwide said it plans to expand XLERATE for Europe with truck service to nine more inland U.S. locations in the next several weeks.
“Our XLERATE service, however, must first have access to premium port-to-port and express terminal gate-out services in Los Angeles for us to put it under the XLERATE rate,” Strader said.
Since sea-air services thrive on supply chain emergencies, C.H. Robinson’s Castle said the number of shipper requests will likely decrease once the COVID-19 virus subsides.
But Shipco’s Ekstroem believes sea-air services will stick around once the COVID-19 pandemic subsides.
“I think the need for cargo capacity will increase faster than our appetite for traveling, and without us traveling, there will be limited belly capacity and airfreight rates will stay high,” he said.
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