Competing in US Transportation & Logistics: Navigating Freight Markets - Essay Sample

Introduction

Transportation and Logistics industry in the United States proves to be highly competitive over time. If one considers investing in this sector, the firm has to position itself for perfect coordination of flow of goods to the world's largest consumer market. Freight market handles various commodities, which, are palletized and transported in containers or trailers. It is majorly road transport with semi-trailers and light trucks moving goods to different routes. Goods commonly transported are from manufacturing companies to the retail centers. General activities in this industry includes but not limited;

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• General long-distance truckload transit
• General long-distance less-than-truckload transit
• Container trucking, long distance
• Motor freight, long distance

United States freight/trucking industry is responsible for movement of most of overland freight and it is divided into three main sectors: Full truckload (FTL), less-than-full truckload (LTF) and couriers. Besides, there has been an increasing concern about the decreased truck drivers over the years. This becomes the biggest challenge threatening the industry. It in turn facilitates the driver's wages to be quite high as compared to other countries hence an obvious expense added to the operating company.

Unites States Freight Markets Players

With the mentioned three sectors above, details in them shall explain these market players and their impact towards the freight business in the United States of America. They include the following:

Full truckload (FTL) - This sector concentrates with dealings in huge matching commodities, which can fill a whole container or a semi-trailer. Fleet under FTL can be owned privately by either a larger manufacturer who needs to needs to transport and distribute their goods. Alternatively, they can be availed for a for-hire basis that generally offers some extra services for transport and logistics. In the United States, the known player in FTL is J.B Hunt, who in 2018 soared to the top and realized operating revenues of over eight billion U.S dollars. The other two players following closely are Schneider National and Knight Swift who had their revenues at 4.5 billion U.S dollars and five billion U.S dollars respectively.

Less-than-truckload (LTL) - These carriers handle shipments that are larger than parcels but not large enough to fill a full trailer. This means that LTL has to imply a strategy of transporting different kinds of shipment at the same time to optimize operations and utilize space. The pronounced players under LTL carrier is FedEx Freight trading with up to 7.3 billion U.S dollars revenue in 2018. The others following closely trading with up to 4 billion U.S dollars in revenue are Old Dominion, XPO Logistics, and YRC Freight.

Courier Sector - This involves carriers of items that are not palletized and light goods, like parcels. In the U.S, dominance of this market is taken over by three key players including US postal service, FedEx and UPS. Apparently, revenues here exceed those at FLT and LTL. UPS in 2018 recorded a revenue from domestic package delivery of close to 43.6 billion U.S dollars while FedEx reported over 29 billion U.S dollars in revenue in 2019. However, these figures cannot be pin pointed to the trucking industry only.

Brokers

Freight brokerage industry becomes the middle ground for the freight industry. Freight brokers provides services of linking customers with trucking companies. Freight markets have witnessed rapid infiltration of the brokers, which has been on the increase for quite some time. Since freight markets face shortage of drivers, it has adverse effects on brokers who rely on carriers by propelling brokers to hike prices to shippers, which would force the shippers to seek for another broker with fair pricing. Amazon therefore launched brokerage platform enabling shippers to access instant quotes and align to freight service.

Increased technology helps the shippers to optimize shipment schedules relating to costs and help carriers to optimize their assets fully. Companies integrated with high technology are the main players here. This move is to help embrace the changes that come along with the digitalization era. It is important to note that brokers are licensed to carry out their roles in the freight market. The technology-enabled services are helping the brokers to provide a Trans figurative value to the market. Examples of brokers include Uber Freight, Convoy, Loadsmart and Transfix amongst others. The brokers understand that the traditional way of doing things results to delays and issues with shipment that are hard to internalize.

Challenges and Competition Within Brokerage Market

Brokers are considered to have the same rights as shippers and are therefore needed to comply with the same requirements imposed to shippers. These requirements are not easy to fulfil since some are very costly. Additionally, the brokerage space is fragmented in nature hence the presence of large regional and global players making it difficult for the local brokers to be successful in the business. Additionally, brokerage market has 8 out of 10 players accounting for more than a third of total gross revenues. Brokers, therefore, need to embrace dynamism.

have an alternative option for the shippers. Resulting in competitive pressures leads to coaxing port operators in ensuring efficiency. Inter - port competition should not be a concern to domestic seaports but instead shared amongst the neighboring countries' ports as well.

Trade and transit - According to the International Maritime Organizations Convention, members should establish committees where stakeholders organize and disentangle the implementation of trade and transport reforms. These collaborations should not be limited to compliance issues only; instead, they should facilitate international trade and transport. Transit should be encouraged in line with international standards.

Monitoring and Evaluation of Strengthening

Container shipping is a milestone in globalization. Container shipping network and maritime transport dwindling have greatly improved, leading to a drop in freight costs. The increased operational efficiency has led to increased load factors and decreased pressures on freight rate. However, the reduced number of traders is posing an oligopolistic threat, where exporters and importers will soon lose options of whom to transport their goods (Delaney). The mergers also pose a threat to seaports that now have to make a huge investment in port's infra and superstructure.

Under competition, I am confident to say that it is a fair competition ground where regulators are promoting healthy competition. Also, suppliers and intermediaries compete in the business as no players are locked out. The process is equally open and fair to all the competitors. When a company cannot manage by itself, immediate merging follows with an agreement drafted.

Freight Market's Transparency

Transparency and accurate data help shippers sway from reacting to the anticipated market changes and proactively and efficiently handle transportation expenses and outcomes. With increased transparency on fuel and freight costs, shippers can be in a position to develop a very informative business plan for the organization. In the freight market, involved traders have the same information about the current trends, new requirements, new developments in every port globally, and different legal requirements for each country. This enhances equal awareness of participants eliminating possible errors that would occur due to lack of information. The freight markets system encourages the sharing of information affecting the flow of the business.

The broader context of global exchange changes is defined by the significant growth in services and knowledge-based economy, disentanglement of barriers for trade, and upcoming new patterns of travel. There are three main points carefully checked on when trying to understand the flow of information; they include production, living, and working (Delaney). Production information determines when the goods are likely to be ready for dispatch, the quantities involved enhancing the number of cargo carriers to be prepared, and the specific items needed for production and ensuring delivery to the site.

In freight markets, pricing, instead of costs vary and are quite uncertain, making the traders not to be so sure of the costs involved. However, it is essential to note that the factors affecting prices are equal to all customers apart from some two. The unpredictable prices are because of a range of economic circumstances, including:

Fuel costs - The relationship between fuel and maritime transport is interdependent. When the fuel costs drop, cargo trucks become cheaper to coordinate, leading to low transportation costs. Loses or savings are then passed to the customers. On the other hand, if fuel prices hike, carriers will pass that price to the merchants.

Freight demand - Prices depend on the quantity of the product under shipment, just as the same as the costs of product storage. If there is no space, operators are propelled to lease an area at a premium. Conversely, if there's reduced business, a carrier may vary over a more competitive rate, for a short period.

Customer Loyalty - is a factor influencing prices to almost all types of business where a carrier regular, consistent activity is well placed to receive a preferential rate, especially in scenarios when demand is deficient.

Government regulation - Regulations may affect the freight industries deepening down. If a government declares an increase in freight costs after a given distance traveled, it remains so.

Geopolitical events - Dangers of pirates and rough governments been warned and addressed by International Maritime Shipping. Estimated losses from global piracy amount to $18 billion in 2014. These figures triggered a move by the carriers as they chose to change routes paying quite more premiums, leading to an increase in freight costs.

The reputation of the merchant - Price quoted in a way reflects the expectation by the carriers. For example, if a courier is known for quick loading, you may be charged a lesser amount.

Hence, to curb the uncertainties of freight costs discussed above, one can consider shipping off-peak, negotiate for a fixed volume, ship less regularly and, reconsider packing (Lau). Otherwise, transparency on how business is carried out here is cool.

Heading - Allocation of Goods and Services

Freight markets engage with a complete system of distribution of goods and services. Here, time is a priority, and if the carrier can deliver within the given timelines, then it is a plus. Price comes later on, after delivery but of course, it is a factor considered at some point. The biggest players indeed take the lead in this business; this is why it can be difficult for small companies to open up and successfully stay on the game. This same reason is a hindrance for the exporters and importers that it generates to an oligopolistic system leading to reduced or no options to choose from. The most influential brand carrier takes the lead always. Most customers feel the satisfaction and surety of their goods delivered at times expected. Additionally, the known carriers understand the system and are well coordinated in the regional governments making their operations easy with fewer hurdles (Lau). When a balance is a stroke between the perfect good over harms related to business, it means ensuring that all the business moves lead to a positive result in terms of profits with less or no losses - that is a business peak.

Financing in Freight Markets

Within the freight market...