COVID-19 Drives Trucking Industry to Focus on Risk Management and Efficiency

“The health risk wasn’t as high up on the list pre-pandemic as it is now,” said Brad Jacobs, CEO of XPO Logistics in a panel discussion at the SMC3 Jump Start 2021 conference. “There was no emphasis on wipes, and on washing hands, and not breathing on each other, [or on] distancing [or] paying attention to one’s health. If anybody in the organization is feeling sick or has any symptoms, please stay home. These are all new. These are mainly new in the industry. That’s not going to go back. That’s going to stay.”

The discussion among industry leaders at the panel conversation focused on trucking industry efficiency in the wake of the coronavirus pandemic, especially in regards to new technology implementation and enhanced methods of risk management.

Ramona Hood had just gotten comfortable in her new position as CEO of Custom Critical for FedEx right at the start of the pandemic. She had to quickly learn the best ways to make fast and efficient decisions, handle incoming data, and leverage business strategies during the most tumultuous time the industry has ever seen.

“The last year, for all of us, has been quite a year,” said Hood. “There certainly have been things that we’ve learned that we can move forward with into 2021. And one of those things is our ability to respond to what’s going on. Being quick to bring either value or bring decisions forward that allow the business to progress.”

On top of new decision-making abilities and a wide understanding of technology innovation, Hood also noted that shutdown policies, which continued to change during the pandemic, made her newly-boosted versatility abilities vitally important.

“When you incorporate business agility into the framework of your strategy and how you move through your initiatives…it brings a new level of value to the organization, your employees, as well as your customers,” she explained. “It’s a way that you can improve your business and be quick to adapt to any new environment–more quickly than if you thought about it in a traditional annual plan environment.”

Technology upgrades can also boost profit margins in a huge way, Jacobs said, with companies able to route their trucks as efficiently as possible and create density in LTL. He’s done so with his company, and expects many other trucking professionals to follow suit.

“It may take them a couple of years to do,” he said. “We’ve taken the smart labor technology, smart labor tools, and workforce automation tools that we have in our contract logistics business [and use them] in order to staff up our warehouses accurately to match demand. We’ve taken those and applied them to LTL.”

By using specific algorithms to predict freight numbers from customers, these technologies were also able to be used to bring on new employees accordingly, as well as create a 5% improvement in overall productivity for the company, according to Jacobs.

“The top 10 LTL carriers probably run 20 million miles a day or something like that,” he explained. “As we use more intelligent technology to route those trucks on the highways, we can probably take out a very significant portion of that, like 10% or 15%. I’m not sure what the limit is. [It] could be more than that.”

LTL carriers have also been steadily lowering their operating ratios, Jacobs noted, also detailing that the trucking industry has been working within the less-than-truckload sector for more precise and accurate probabilities and prices.

“I think the long-term trend for LTL is to have more profitable operations,” said Jacobs. “I think technology is the underlying motivation of growth in LTL profits and all kinds of different technologies, [especially regarding] technology on [pickup and delivery] optimization.”

Additionally, new intelligent technology could have major effects on a trucking company’s bottom line. It could also bring in better overall pricing systems and improve current issues regarding overpricing and underpricing, which lead to either a loss of business or a loss of money.

“The pricing system in LTL is archaic,” said Jacobs. “It’s not going to last. It’s not efficient, and things that aren’t efficient don’t last. It’s surprising it’s lasted this long. Eventually, we’ll sell LTL based on space and on dimensions, because that’s what we have.”

Still, Jacobs remains hopeful.

“It’s not just on weight and it’s not on these arbitrary classifications, either, that aren’t always accurate,” he continued. “So, I think the way freight is priced will be more automated, [and] more [often] done by algorithms. I think it’ll be more accurate.”