The COVID pandemic and the resulting strain on the supply chain and logistics industries made it clear that innovations are still needed to make the transportation network more efficient.
Global logistics technology provider Descartes recently published the results of a study of 1,000 supply chain and logistics executives that examined how the challenges of the last few years have impacted innovation in those industries.
Joining Jason and Matt this week on the 10-44 is Chris Jones, executive vice president of industry and services at Descartes, who talks about some of the study's findings.
Contents of this video
00:00 Acceleration of supply chain innovation
02:22 Necessity pushed innovation
05:29 Driver retention and selective business growth
07:03 Lowering cost and improving reliability
08:11 Real-time tracking in logistics
10:35 Driver retention and productivity
14:33 Senior management’s views supply chain and logistics innovation
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However, the supply chain challenges in the last three years accelerated transportation innovation.
Hey everybody, and welcome back to the 10-44, a weekly episode from the editors here at CCJ. I'm Jason Cannon and my co-host on the other side is Matt Cole. The COVID pandemic and the strain that it put on the supply chain has made it clear that innovations are still needed to make transportation networks more efficient.
Global logistics technology provider Descartes recently published the results of a study of 1,000 supply chain and logistics executives that examined how the challenges of the last few years have impacted innovation in those industries. Joining us this week on the 10-44 is Chris Jones, Executive Vice President of Industry and Services at Descartes who talks about the biggest takeaways from the report.
My focus is really around I'll call it taking a lot of the knowledge that we have as a company. We're a global provider of logistics technologies and supply chain technologies, and we work with everybody from I would describe it as Joe six pack trucker to the biggest LSPs in the world, and same thing on the retail and manufacturing and distribution side. So we do a lot of very interesting things with these people. We think there's a lot of applicability for others and it's really about education.
That's really one of the reasons why we did this innovation study was we wanted to get a sense of after the pandemic what happened, what did people learn during it, and were they more focused on innovation, less focused on innovation, where were they focused on innovation, all this kind of good stuff, and then give people a sense of really what others are doing and how to think about it in a couple different ways.
We did 1,000 people for this study. It's specifically does have shippers in it, carriers in it, and LSPs by design. We did it in North America, so U.S. and Canada in particular, and then nine countries in Europe when we wanted to get a kind of cross section of those. We do have some pretty interesting also breakdowns by the countries themselves. That was really the group of people. Obviously, they all have different perspectives and that's what we wanted to really capture.
Now, Chris defines innovation is doing things that really make a difference for a company's customers. He says 2020 really made carriers think about the way they operate.
Couple things. I think one is without a doubt it was a kick in the pants, right? Everything from driver shortage to I'll call it certain parts of the business being absolutely slammed, others getting shut down, right? The term pivot was probably one of the biggest terms of 2020, right? So I think what it did was it really shook the foundation of how many people thought they needed to run their business. So carriers had to react to this in a lot of different ways, sometimes even simultaneously in opposite directions, right? So that was kind of one part of it.
What really it did was it caused them to say, "We need to do things differently." So if you think about innovation, I mean, real innovation is about doing things that actually make a difference to your customers, things that are unique and so forth. So it did cause people to really challenge the norms of how they were running their businesses. I think the other part of it that also really kind of hit home, I'll call it the companies, the carriers, LSPs or shippers that basically had already been down a path of enabling agility in their businesses using technology as an example. They're the ones that really did the best out of this. So I think that was another lesson for most people.
So all of a sudden now you're like, "What you're doing isn't necessarily the best anymore." You could see the holes, you could see what the competition's doing and you could see your own limitations. I think that's really kind of what changed people's mindsets and really caused them to come out of it accelerating the amount of innovation that they're doing just to be able to survive and really compete now.
In the carrier community, Chris says he saw the most innovation during the pandemic in two areas, driver retention and being more selective in growing business. We'll hear more from that on a word from 10-44 sponsor, Chevron Lubricants.
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One has been I think there's a greater appreciation for drivers now. When I say that it's as much from a purely commercial perspective of all of a sudden when there was a shortage, there wasn't any kind of pull out there. I mean, we've known we've had issues with just I'll call it the demand for drivers for a number of years and aging of drivers, but it got heightened, absolutely heightened. So you saw people focus on driver retention a lot more. Money was a big part of it, but it's not the only part. People walk away after a while even when there's more money if they're extremely stressful as an example, right? There wasn't a pool of people for them to go get to replace. I think that that's a really good example where we've seen a lot of change.
I think the other thing is being smarter about the business they take. In the carrier community, probably the most famous place for, there's really two of them, one would be UPS as an example saying all business is not good business. It's not a bad decision if you have that luxury to do that. They pulled back on even big customers. I've talked to a number of them and said, "We're not going to take it all. This is what we're willing to do with you." Look at what it did for their financials, right? Some quite strong performance, not just because of the volumes, right? It's because of what they were doing.
That's another area where the carrier community, I think, really I'll call it broke from some of the traditional things of, "I'll take all the business I can get," to looking at I'll call it profitable growth, not just growth and overall health of the business.
The biggest drivers of innovation in transportation according to the study were lowering cost and improving reliability.
The number one motivation points were, and they were tied actually, were lowering costs and improving reliability. I think these days that would sort of make sense for everybody, right? Costs are up across the board. Reliability, to be honest with you, was a mess for the longest time, still isn't where it was pre-pandemic. So that was at 37% for both those. The carrier community was the same two points, a little bit lower, slightly lower, 35% for lower costs and 31 for reliability. I don't think those are very different, and I think everybody would, once hearing them, would say it makes sense to where we are, right?
Reliability was I'll call it the chaos that went on during the pandemic, and not always caused by carriers as we know. The cost thing is really what's happened over particularly the last I'd say 15 months where we've had inflation take off and then costs across the board. Then obviously fuel costs have really been a big driver of that, right? That's really where we saw things, if you will, the direction that the innovation was really headed.
Almost half of participants in the Descartes study have already fully integrated real-time tracking into their operations. Chris says there are a few reasons for why tracking has become so important in logistics.
I'll give you three answers. They're somewhat related, but they're a little different. One is delivery variability, right? Unfortunately, that became a big issue. Let's go back to 2019, and you think about how supply chains operated. They were pretty steady state, right? Lot of focus over the years on smoothing out disruptions, and if you will, the economy was growing and we could even show that in things like shipment volumes and so forth, but at a pretty measured level. So a lot of what I would describe is called everything became sort of normal and more predictable. That went out the window, right? So now all of a sudden when you don't know where your shipments are and you need them, because if you go back and say, okay, look at what was going on with demand, especially durable goods, visibility all of a sudden became a big deal because of all that variability.
The second thing is that the shipper community has recognized that, and this has been a long time coming but it really kind of again got a kick, was if you know where your goods are and you feel like you have a good understanding of where they are in predictability then of when they're going to show up, you can actually make inventory deployment decisions in advance of it actually hitting the dock, right? So whether you talk about things like cross docking that have existed in the past, but in many cases, let's just say for manufacturers and so forth, they're looking for components or materials or whatever, and they may need them at a certain point to make things. Well, if they're going to be a day later, two days late, that could be catastrophic in the lean world, right?
But if you know that in advance, you may say, "Well, I won't make that product tomorrow. I'll make another one that I have stuff for. Maybe it's not ideal, but it's better than not running." Right? So that's really where we saw a lot of it happen. Then the last thing is when you take that data and you integrate it into your TMS or other applications that you have, order fulfillment applications and so forth, it makes them better, right? So you can actually, let's say plan versus actual, what's really happening and do I need to change my transit times as an example, or other types of things like that, right? That's really kind of where all of that's come together and why it's become really such a big deal.
Looking ahead, Chris sees driver retention and productivity as the biggest areas in trucking that will see more innovation in the near future.
Right. Well, I think one area, and I'm going to talk areas really first, okay, is driver retention and productivity, all right? Is going to continue to be a big area. There's a couple things that come out of that as we were talking earlier, right? It's not just about money for drivers, it's really about taking the stress out of it and feeling like they're rewarded for what they do, but they're enabled to do what they need to do. I would just say that the carrier community, particularly over the road carrier community, didn't really operate that way in the past when you felt that capacity was infinite, right?.
Now it's not, okay? It really probably wasn't all along, but it really didn't matter it seems like. Now all of a sudden you got to say, "Okay, what am I doing?" So let's just talk maybe a couple areas quickly. One of them is being smarter at what you're asking the drivers to do. So in other words, think of it as like how can you put together trips for drivers that, one, you actually now have to be more careful in terms of compliance and what you can drive and so forth. But also it's things like just not giving loads to drivers as an example and just saying, "Go do it and then go find yourself another one," as an example, right?
It's going to be more along the lines of being smarter at things like collaboration. Carriers, or particularly freight brokers as an example, sharing their plans, sharing where they operate. What we have found, and this is where I think it's really interesting is this is a classic network effect, right? You may be really running well in one lane and you run somewhat in another lane and you find out there's a whole bunch of other people who are running in that lane but may be running in an opposite direction that you are, right? All of a sudden now, what if I could go and provide the carriers with I'll call it better quality loads, which is a combination of thinking from the driver or the carrier perspective, I need them to go out and I need them to come back, if I keep it real simple, right?
So how do I make sure that I'm doing that? Also, when I'm doing it in a way that says, for instance, there might be a second load, okay, let's say a return load, excuse me, where is that load, right? Can I pick an opportunity for a driver who's 50 miles away versus 150 miles away, right? So the fact that it exists is great, but I still have basically non-productive miles of which the carrier's paying for and the driver. If we go through I'll just say all the compensation stuff, all those things matter, right?
So can I be smarter? What we've seen is when particularly freight brokers share that information, they find one, they find more opportunities to do better matching, right? So that whole notion of really loading up the carriers and they improve productivity on both ends. So we think there's going to be more in that space and where drivers are going to have more knowledge of what's out there, in particular, that they can pick up loads, and if you will, we're just going to improve the overall efficiency of the industry, right? I think that's really where it's going to happen. It's not going to be let's call it just carrier A doing just a better job. It's more along the lines of A plus B plus C plus D. They all will be doing a lot better and benefit from it, right?
Then just maybe one other comment on the retention side too is looking at I'll call it being smarter in terms of enabling the drivers. I think safety and compliance is a huge focus still just because of things like liability. But quite frankly, I think everybody knows that safer drivers are better drivers, right? I think there's going to be a lot more focus in that arena, and especially, and this is going to be my last comment, which is as we look at the aging and retirement of drivers and new drivers coming in, we're going to really need to do a better job, a more comprehensive job at making newer people more effective, wanting to stay, and then basically, and that's whole vein safer as well.
One thing Descartes did in its study was analyze how a company's senior management views innovation and how that affects the company's financial performance and employee turnover.
So one of the things we did in this study, and that's why we really think it's very interesting for people to read it, is we asked three questions and we compared the results of those three questions against a lot of other questions that are in that study, right? So those questions were one, we said, "How does senior management view supply chain or logistics innovation? Do they think it's important or do they think it's not important?" Right? That was one question.
Another one we asked them was how well they're doing financially? Are they doing really well or are they not doing well? The last thing was, and this gets back to retention, we asked them about employee turnover. Are they doing a good job and having lower turnover or higher turnover? What was absolutely the case through the whole study, as we talked about just acceleration of innovation, what things they were doing, how much they were doing, all this kind of stuff, if management thought it was a big deal, it happens, right? If management didn't, it's not. There's no support for it, right? But equally, guess what? People are doing better financially.
So if we said management importance and compare that to financial results, it lines up pretty closely. Then guess what? Lo and behold, when it comes to employee retention, it's the same story, right? Innovation actually helps with retention. Financial performance helps with retention, right? You need those people. It's kind of a circular argument in some respect. You need those people to do the innovative things because they're the ones that if you're not having stability in your business, they're the ones who really understand what's going on. If you do it in the right way, you get what all your best people know, right? A lot of times, those are your senior people, been there, done that. So I thought that was really kind of an interesting perspective.
That's it for this week's 10-44. You can read more on ccjdigital.com. As always, you can find the 10-44 each week on CCJ's YouTube channel. If you've got questions, comments, criticisms or feedback, please hit us up at firstname.lastname@example.org or give us a call at 404-491-1380. Until next week. Everybody stay safe.