It’s a critical time for the drayage industry as increased volume, battles with shippers over low rates, and operational inefficiency make for a volatile landscape. Much has happened since the last So Cal Supply Chain Meetup Group’s panel discussion at the end of 2023:
Inflation has cooled to a relatively stable 3.3%
Traffic through the Panama and Suez canals has been impacted by many factors
Southern California port volume is booming
Rates for drayage trucking remain low
AI is putting even more pressure on the industry’s fragmented data
I had the honor of sitting alongside industry experts Matt Schrap from the Harbor Trucking Association, Paul Bingham from S&P Global Market Intelligence, and Weston LaBar from InductEV, for our 12th panel discussion during DrayTECH 2024. From economic drivers to managing higher volumes to the promise of AI, here’s what’s in store for the rest of the year.
1: Faster import growth has increased volume
Paul Bingham highlighted some of the unexpected economic shifts we've seen recently. In December, he anticipated a significant slowdown in the U.S. economy for 2024, forecasting a GDP growth of just 1.5%. Fast forward to June, and his outlook has shifted to a more optimistic 2.5%. This adjustment is largely due to stronger-than-expected consumer demand and faster import growth, even as export growth lags slightly behind.
Consumer behavior has been a major driver of these economic trends. Households have continued to spend at a brisk pace, often going into debt to maintain their consumption levels. This consumer resilience has contributed to higher import volumes, particularly of finished goods. Interestingly, while industrial production has remained flat, consumer-driven imports have surged, illustrating a shift in economic activity.
2: Various factors contribute to booming West Coast ports
One of the most significant regional impacts has been on West Coast ports, particularly in Southern California. Issues such as the Panama Canal's transit limitations and economic closures of the Suez Canal have redirected traffic to West Coast ports. Additionally, concerns about potential labor disputes on the East and Gulf Coasts have made West Coast ports more attractive for supply chain managers seeking to mitigate risks.
This shift has resulted in double-digit growth in trade volumes for Southern California ports. Supply chain managers have found that the performance and efficiency of these ports have improved significantly since the pandemic, but concerns about congestion and capacity remain, especially with rail freight.
3: Higher volume, lower rates: How can technology help?
Matt Schrap provided valuable insights into the operational challenges facing drayage trucking companies. Despite the increased trade volumes, truckers are struggling to maintain profitability. Rates have dropped, driven by shippers' relentless cost-cutting measures. This price pressure is compounded by regulatory challenges and operational inefficiencies at marine terminals.
Truckers are facing difficulties securing appointments and dealing with detention and demurrage billing issues. Moreover, long-term contracts with shippers are being renegotiated or broken, as shippers seek cheaper alternatives, further squeezing margins for trucking companies.
With rates being the same or less and wages being high, drayage companies want to avoid going out and hiring a bunch of people and then letting them go as soon as the next market downturn begins. By implementing technology and automating a lot of your processes and workflow, you can keep up with increasing volume without adding headcount.
4: Data hoarding is hurting, not helping
Data continues to be a challenge for the drayage industry. According to Matt Schrap, some port authorities are hoarding data out of fear of being required to rip and replace systems. The result is a lack of transparency, and the pursuit of a single agnostic appointment system remains elusive.
Data hoarding is also slowing down AI adoption across the industry, according to Weston LaBar from InductEV: “A lot of people hoard [data] and don’t share it. And so we need to get to open data standards where you can see what's going on with turn times at the port, and you can see what's going on with appointment availability.”
The fact of the matter is that connecting systems via API and EDI and integrating AI is the only way the industry will be able to overcome operational inefficiencies, increasing volume, and flat or reduced rates. Sharing data responsibly — while remaining compliant to security, privacy, and regulatory regulations — will open more opportunities for automation and improved efficiency.
We know it’s possible because we’re already doing it. We developed a new capability to embed your email with your PortPro system and utilize AI so that load information extracted from your email inbox will automatically index and attach to the corresponding load or quote in PortPro, ensuring all details are accurately captured and organized without manual input. Our AI will help customers automate their load tendering and quoting process, to help avoid unnecessary demurrage fees due to human error and much more.
Keep up with industry trends through the So Cal Supply Chain Meetup Group
These are just some of the highlights from our discussion, which also included the complex relationships with ports, the gradual influx of electric and hydrogen trucks, and how rail is struggling to keep up with volume (in part because there is insufficient capacity of Class I freight railroads serving the entire West Coast…where most of the growth is occurring).
Check out the complete panel discussion below.
https://www.youtube.com/watch?v=sZ6uUERi3sk
PortPro, Harbor Trucking Association, and 4th Sector Innovations sponsor the So Cal Supply Chain Meetup group. The 500+ member group sponsors up to five in-person events annually to connect supply chain professionals, technologists, and other innovators across California. To become a member or to learn about future events, visit the website and follow us on LinkedIn.
