Shippers should be using spot market more, says J.B. Hunt exec
Instead of viewing spot as “a four-letter bad word,” Shelley Simpson says customers should take advantage of dynamic pricing for their “unpredictable loads.”
Trucking customers have been conducting bids in the same way since 1996, and it’s beyond time for the process to change, according to Shelley Simpson, president of J.B. Hunt Transport Services. Speaking at the Massachusetts Institute of Technology (MIT) on Tuesday, Simpson proposed that shippers should be taking greater advantage of the short-term spot market.
“For customers, spot is a four-letter word,” she said. “It shouldn’t be.”
Simpson advocated that customers should take a strategic approach to the spot market, using it to dynamically price and secure capacity in real time for unpredictable loads, while continuing to use long-term contracts for more predictable loads.
Simpson believes that the spot market gets a bad name because customers only turn to it when disruptions are occurring and capacity is scarce. At those times, prices are naturally elevated. “Typically [customers] don’t ride the wave back down when spot will normalize and actually go below a contract price,” she said. “If you look at it over a longer period of time, it’s actually a great procurement process and strategy.”
Simpson said that if she were a shipper, she would procure her “static business and a little bit extra” in a bid process, and then procure the rest dynamically on the spot market. But to make that change in strategy, Simpson believes it will take getting this message to the C-suite level. “If you think about who thinks long term, it is someone sitting in that chief role because at the VP role, they’re going to be focused on managing to budget for the year,” she said.
Simpson went on to speak on a variety of other topics, such as the benefits of freight-matching technology, how J.B. Hunt has created a culture of innovation, and her belief that the economy is in a “freight recession.” Like many transportation executives, Simpson is less optimistic than her customers about when the economy will recover.
“I do think short term, we have some pains to go through, but over the long term I am optimistic,” she said.
Simpson’s optimism is in part fueled by a greater realization at the C-suite level of how supply chain can be a differentiator and a greater willingness among customers to collaborate and be more open about their data and what is happening in their operations.
Simpson’s “fireside chat” with Caplice was part of the Crossroads 2023 one-day conference put on by MIT’s Center of Transportation and Logistics.
That result came from the company’s “GEP Global Supply Chain Volatility Index,” an indicator tracking demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses. The October index number was -0.39, which was up only slightly from its level of -0.43 in September.
Researchers found a steep rise in slack across North American supply chains due to declining factory activity in the U.S. In fact, purchasing managers at U.S. manufacturers made their strongest cutbacks to buying volumes in nearly a year and a half, indicating that factories in the world's largest economy are preparing for lower production volumes, GEP said.
Elsewhere, suppliers feeding Asia also reported spare capacity in October, albeit to a lesser degree than seen in Western markets. Europe's industrial plight remained a key feature of the data in October, as vendor capacity was significantly underutilized, reflecting a continuation of subdued demand in key manufacturing hubs across the continent.
"We're in a buyers' market. October is the fourth straight month that suppliers worldwide reported spare capacity, with notable contractions in factory demand across North America and Europe, underscoring the challenging outlook for Western manufacturers," Todd Bremer, vice president, GEP, said in a release. "President-elect Trump inherits U.S. manufacturers with plenty of spare capacity while in contrast, China's modest rebound and strong expansion in India demonstrate greater resilience in Asia."
Even as the e-commerce sector overall continues expanding toward a forecasted 41% of all retail sales by 2027, many small to medium e-commerce companies are struggling to find the investment funding they need to increase sales, according to a sector survey from online capital platform Stenn.
Global geopolitical instability and increasing inflation are causing e-commerce firms to face a liquidity crisis, which means companies may not be able to access the funds they need to grow, Stenn’s survey of 500 senior e-commerce leaders found. The research was conducted by Opinion Matters between August 29 and September 5.
Survey findings include:
61.8% of leaders who sought growth capital did so to invest in advanced technologies, such as AI and machine learning, to improve their businesses.
When asked which resources they wished they had more access to, 63.8% of respondents pointed to growth capital.
Women indicated a stronger need for business operations training (51.2%) and financial planning resources (48.8%) compared to men (30.8% and 15.4%).
40% of business owners are seeking external financial advice and mentorship at least once a week to help with business decisions.
Almost half (49.6%) of respondents are proactively forecasting their business activity 6-18 months ahead.
“As e-commerce continues to grow rapidly, driven by increasing online consumer demand and technological innovation, it’s important to remember that capital constraints and access to growth financing remain persistent hurdles for many e-commerce business leaders especially at small and medium-sized businesses,” Noel Hillman, Chief Commercial Officer at Stenn, said in a release. “In this competitive landscape, ensuring liquidity and optimizing supply chain processes are critical to sustaining growth and scaling operations.”
With six keynote and more than 100 educational sessions, CSCMP EDGE 2024 offered a wealth of content. Here are highlights from just some of the presentations.
A great American story
Author and entrepreneur Fawn Weaver closed out the first day of the conference by telling the little-known story of Nathan “Nearest” Green, who was born into slavery, freed after the Civil War, and went on to become the first master distiller for the Jack Daniel’s Whiskey brand. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
She told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest. That story also inspired her to create Uncle Nearest Premium Whiskey.
Weaver discussed the barriers she encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, pointing to a recent project in which the company was able to fast-track a new Uncle Nearest product thanks to close collaboration with its supply chain partners.
A two-pronged business transformation
We may be living in a world full of technology, but strategy and focus remain the top priorities when it comes to managing a business and its supply chains. So says Roberto Isaias, executive vice president and chief supply chain officer for toy manufacturing and entertainment company Mattel.
Isaias emphasized the point during his keynote on day two of EDGE 2024. He described how Mattel transformed itself amid surging demand for Barbie-branded items following the success of the Barbie movie.
That transformation, according to Isaias, came on two fronts: commercially and logistically. Today, Mattel is steadily moving beyond the toy aisle with two films and 13 TV series in production as well as 14 films and 35 shows in development. And as for those supply chain gains? The company has saved millions, increased productivity, and improved profit margins—even amid cost increases and inflation.
A framework for chasing excellence
Most of the time when CEOs present at an industry conference, they like to talk about their companies’ success stories. Not J.B. Hunt’s Shelley Simpson. Speaking at EDGE, the trucking company’s president and CEO led with a story about a time that the company lost a major customer.
According to Simpson, the company had a customer of their dedicated contract business in 2001 that was consistently making late shipments with no lead time. “We were working like crazy to try to satisfy them, and lost their business,” Simpson said.
When the team at J.B. Hunt later met with the customer’s chief supply chain officer and related all they had been doing, the customer responded, “You never shared everything you were doing for us.”
Out of that experience, came J.B. Hunt’s Customer Value Delivery framework. The framework consists of five steps: 1) understand customer needs, 2) deliver expectations, 3) measure results, 4) communicate performance, and 5) anticipate new value.
Next year’s CSCMP EDGE conference on October 5–8 in National Harbor, Md., promises to have a similarly deep lineup of keynote presentations. Register early at www.cscmpedge.org.
Amid unprecedented challenges, the 2024 State of Logistics Report arrives at a crucial time for the global logistics industry. Now in its 35th edition, it remains a cornerstone for professionals, offering invaluable insights into a landscape marked by economic uncertainty, geopolitical instability, and the escalating impacts of climate change. For decades, this report has guided shippers, carriers, and industry leaders with clarity and strategic foresight in navigating an ever-evolving global economy.
According to the report, the balance between shippers and carriers may shift again in the coming months. Potential rate increases loom, driven by external factors like geopolitical developments and environmental concerns. In such uncertain times, comprehensive, data-driven insights are invaluable.
The report provides a detailed understanding of current market dynamics, grounded in data, expert analyses from CSCMP and Penske Logistics, and insights from leading global companies. This rich compilation helps logistics professionals plan strategies to not only weather the storm but also achieve long-term success.
A key takeaway is the contrast between carriers' challenges and shippers' opportunities. Carriers face high operating costs, weak demand, and excess capacity, increasing financial pressure. Conversely, shippers are capitalizing on lower rates and diversifying carrier relationships to enhance resilience. Some are even monetizing their logistical capabilities, turning challenges into advantages.
The report's importance is underscored by over 60 press outlets globally, garnering significant media attention from the likes of Supply Chain Xchange, DC Velocity, and The Wall Street Journal. Many noted that professionals are adapting to “permanent volatility” by leveraging technology to manage disruptions. Meanwhile, Paul Page of The Wall Street Journal notes that U.S. business logistics costs accounted for 8.7% of GDP in 2023, highlighting the industry's integral role in the economy.
At CSCMP, we take pride in releasing the State of Logistics Report, providing professionals with essential information to make informed decisions in a complex world. Our partnership with Penske Logistics and others ensures the report is comprehensive and forward-looking, offering actionable insights to drive the industry forward.
Looking ahead, challenges persist, but with the right tools, data, and strategies, the logistics industry is well-positioned to navigate this turbulent economy. The 2024 State of Logistics Report serves as both a guide and a call to action, encouraging professionals to think creatively, plan strategically, and act decisively amid uncertainty.
CSCMP remains committed to supporting our members and the broader logistics community. Through collaboration, innovation, and knowledge-sharing, we believe the industry can overcome today's challenges and seize opportunities. The future of logistics is complex, but with the right insights and leadership, it is also filled with promise.
2024 was expected to be a bounce-back year for the logistics industry. We had the pandemic in the rearview mirror, and the economy was proving to be more resilient than expected, defying those prognosticators who believed a recession was imminent.
While most of the economy managed to stabilize in 2024, the logistics industry continued to see disruption and changes in international trade. World events conspired to drive much of the narrative surrounding the flow of goods worldwide. Additionally, a diminished reliance on China as a source for goods reduced some of the international trade flow from that manufacturing hub. Some of this trade diverted to other Asian nations, while nearshoring efforts brought some production back to North America, particularly Mexico.
Meanwhile trucking in the United States continued its 2-year recession, highlighted by weaker demand and excess capacity. Both contributed to a slow year, especially for truckload carriers that comprise about 90% of over-the-road shipments.
Labor issues were also front and center in 2024, as ports and rail companies dealt with threats of strikes, which resulted in new contracts and increased costs. Labor—and often a lack of it—continues to be an ongoing concern in the logistics industry.
In this annual issue, we bring a year-end perspective to these topics and more. Our issue is designed to complement CSCMP’s 35th Annual State of Logistics Report, which was released in June, and includes updates that were presented at the CSCMP EDGE conference held in October. In addition to this overview of the market, we have engaged top industry experts to dig into the status of key logistics sectors.
Hopefully as we move into 2025, logistics markets will build on an improving economy and strong consumer demand, while stabilizing those parts of the industry that could use some adrenaline, such as trucking. By this time next year, we hope to see a full recovery as the market fulfills its promise to deliver the needs of our very connected world.