Carriers bet on Capacity-as-a-Service
Over the past decade, as-a-service (aaS) business models have infiltrated supply chain actors in order to advance the industry to keep up with increasingly tech-focused lifestyles.
Software-as-a-service (SaaS) has targeted shippers across the globe, promising an easier way to handle in-house procurement and transportation workflows, and offer a layer of resilience when unforeseen hurdles arise.
SaaS-based solutions have also been promoted within the freight brokerage space, eventually fueling the rise of the digital freight broker.
These aaS technologies have become more attractive as companies realize the amount of waste hiding within their older, manual business models. They are no longer looking at it as advanced technology but table stakes needed to remain competitive.
Now, trucking companies are beginning to follow suit.
They have historically sat on the advantage of their greatest sales asset, the wheels on the ground.
With an unprecedented high level of freight available, carriers are finding out that a truck is not enough to retain a customer.
Their product is no longer a truck, but the supply to meet the customer’s demand today and in the future.
Capacity-as-a-Service sales model
Capacity-as-a-service (CaaS) is a business methodology in which carriers use their trucks to sell an outcome, and in transportation that outcome is a positive shipping experience from pickup to transit to on-time delivery. This can also mean adding other services to cater to customer requests.
This servitization of the trucking industry means there is a need for carriers to have better transparency of their available equipment in order to add new revenue streams, including warehousing, maintaining environmental, social and governance (ESG) requirements and offering final-mile delivery services.
Carriers are finding the best way to manage these new requests is to invest in technology that will improve their operations in order to meet the potential needs of their customers. Operation upgrades can include vehicle telematics, blockchain technology, digital freight brokering integrations and trucking optimization platforms.
An example of a company that has been working toward this goal for the past decade is J.B. Hunt Transportation Service Inc. (NASDAQ:JBHT).
At the FreightWaves LIVE @HOME event in 2020, CEO John Roberts III discussed the service-related need behind the adaptation of the company’s platform, J.B Hunt 360.
“We started talking through a modernization and that evolved — the conversation opened up into, what else could we do if we had more bandwidth and flexibility and access, and what would we be able to do for our customers and our people with more data?” Roberts said.
“Much of what we’d done up to that point had been more rigid, more analytical, more engineered — pricing is a science, equipment utilization is fully industrial engineering-based — and now we are going to go and try things we wouldn’t let ourselves try before,” he said.
The work that J.B. Hunt has done to digitize its processes has allowed the company to continue building value-adding tools to enter new market verticals, including the recent addition of temperature-controlled transportation available through its Shipper 360 platform.
“J.B. Hunt 360 has opened the marketplace for shippers and carriers to connect, and we continue to expand that by bringing new solutions, such as temperature-controlled, into the platform,” said Chief Commercial Officer Shelley Simpson. “Shipper 360, specifically, enables businesses of all sizes to be more responsive in today’s dynamic freight market and match their capacity needs with the right truck at the right time.”
While J.B. Hunt has the resources to attack these initiatives in house, trucking companies are turning to integrated logistics platforms to help diversify their existing services.
Harismran Singh, chief executive officer of Gillson Trucking, recently integrated all of his trucking management programs into one platform, LoadStop’s SmartTMS. The transportation management system is designed to facilitate the workflows and operations of a trucking company.
Integrating all operations into one platform allowed his dispatchers to optimize current capacity and meet customers’ rate expectations.
“Customers like to have faith in the carrier so that they can trust the carrier for the volume they have committed and trust [rates] will not fluctuate during market swings,” said Singh.
Trucking companies also are integrating with other platforms to add new services to their current offerings.
Andrus Transportation Service, a trucking company based in Utah, recently partnered with final-mile logistics platform Baton.
Not only did this partnership reduce the average wait time for its fleet and add more capacity for the trucking company’s long-haul business, but the partnership enabled Andrus to offer effective final-mile services to its customers.
During FreightWaves LIVE @HOME, Andrew Berberick, co-founder of Baton, explained how the company leverages the freight of multiple trucking companies to eventually create more locations that those same companies can use to sell final-mile services.
“Every one of our customers actually has a local relay operation somewhere,” he said. “The problem is, in order to operate a local relay, you need enough volume and density to keep a local fleet utilized. Because we are an aggregator, we can combine the freight between multiple carriers to give them that economies-of-scale advantage. … We can open new locations that none of them would have been able to open without each other.”
Legacy visibility software solutions are seeing this increase in technology investments and building new products customized for the carrier experience.
Descartes Macropoint (NASDAQ:DSGX), a leader in supply chain visibility, whose MacroPoint for Truckers mobile app has recently surpassed a million unique drivers, plans to release a set of enhancements this summer that will let drivers receive load offers directly to the mobile application.
“The mobile app will give owner operators the ability to opt in to receiving load offers, matched by artificial intelligence, to their ideal freight markets,” Dan Cicerchi, general manager and vice president of Transportation Management Solutions, told FreightWaves. “Carriers are starting to use our solution to really gain their own opportunities and become more independent in managing their freight.”
Having access to these tools enables a carrier to take on new business, knowing they will be able to find freight for backhauls and add capacity outside of their fleet from already trusted partners.
Energy Transportation Group, an asset-based 3PL, recently announced they are using Descartes Macropoint solution to improve capacity matching, carrier compliance and track deliveries to customers in industries ranging from food and beverage to emergency supplies.
Outcome of innovation
As trucking companies transform their technology suites to move towards servitization, they find positive outcomes in other areas of their business, including safety, training and retention.
Recently, A&R Logistics announced it had begun using Idelic’s Safety Suite, a comprehensive platform that integrates fleet data into one location.
The integration is enabling A&R Logistics to manage its growing capacity, as it has recently acquired First Choice Logistics, L.T. Harnett Trucking and Luckey Trucking to expand its customer service offerings.
While the tool is helping with consolidating the fleet of almost 1,000 drivers, the telematics data allows them to develop and train drivers, which can aid driver retention and recruiting.
“I truly believe that every driver wants to be the best driver,” said Dionne Quiachon, A&R’s chief environmental, health, safety and security officer. “With this system, we can help them do that. We can show them: ‘Here is where you are really doing great and here’s your areas of opportunity to get better.’ [With Safety Suite] we can coach them, we can teach them and we can train them, and all of that is documented within the system.”
These trucking investment trends are not going unnoticed by their suppliers either.
A recent survey by the IBM Institute for Business Value (NYSE:IBM) found that 64% of truck manufacturing executives said the future of their organization depended on their ability to offer a service to their fleet customers, known as Truck-as-a-Service.
For example, Volvo Group currently uses IBM Hybrid Cloud to predict maintenance needed on a truck while it is on its way in for a repair. The survey found this reduced diagnostic time by 70% and lowered repair time by 20%, giving Volvo truck users a competitive advantage over competitors.
The study found that by 2030, $465 billion of annual revenue will likely shift from sales to services that will consist of integrated fleet management tools, intelligent automation, data security and privacy, and enhanced driver features.
Truck manufacturers projects $118 billion will be spent just on trucking companies training and developing their employees to handle technological advances being added to trucks.
With all that revenue up for grabs, it seems only a matter of time before the aaS model has made its way through all pillars of the supply chain.
Source: Freight Waves