Transportation Industry Outlook and Trends Part 1: Q&A with Trimble’s Mike Hamill

As 2023 comes to a close, we’re looking back at a challenging year in the transportation industry and ahead to a new year full of opportunity. In this first part of a two-part interview with Trimble’s Mike Hamill, Transportation sector vice president of strategy, he discusses the transportation trends and events that shaped 2023 and his outlook on the things that will shape the industry in 2024. 

Despite a recent freight recession, we’re excited that numerous companies have seized the chance to set themselves up for success in 2024 through thoughtful leadership and smart decision making. And whether the market is up or down, Trimble’s strategy team works across the business to align priorities and make adjustments to ensure we’re delivering the meaningful solutions transportation companies need to be resilient. Especially as they traverse difficult times and look to strengthen their position to thrive in the future.

What is the current state of the transportation industry and what is the outlook for the future?

The business of the transportation industry moves with the economic cycles. Since the second half of 2022, there’s been an imbalance in the freight market due to an abundance of trucking capacity in the market. When rates increased dramatically post-lockdown, additional capacity entered the market on a steady pace over a long period of time to meet some of the highest demand we've ever seen. Because high rates sustained over time, even more drivers decided to enter the market. At the same time, carrier costs began to increase for equipment, fuel and labor due to various reasons, including the supply chain challenges we all felt.

As a result, we’ve seen a surge in carrier bankruptcies and market exists. Many carriers purchased equipment at a high cost and when rates dropped quickly, their margins compressed significantly. Therefore, putting much pressure on their profitability. Some optimistic economic predictions suggest a market balance will happen in mid to late 2024, but there’s not a crystal ball. When you think of the cycle, we're in the trough, bouncing along the bottom at this point. While I'm cautiously optimistic amidst economic uncertainty, there's still an opportunity for contract rates to come down further based on where they're at versus spot rates today.

Once supply and demand come into balance, there's typically a period of time where spot rates need to surpass contract rates for a period of time before you'll see contract rates start to increase. Carriers are certainly watching market rates very closely to identify the right timing for the opportunity to increase their rates. 

For years, a driver shortage has been a top issue. With extra capacity now, is this no longer an issue?

While some recent reports listed the topic of driver shortage lower on the list of industry challenges than in past years, it's always an issue carriers must address. From my perspective, the issue is more about driver experience, and we as an industry and a tech provider that serves the carrier can address this. We need to help create a better driver experience to provide greater ease in doing their work, improving their safety, utilization and productivity to create a better lifestyle for drivers.

There’s a multitude of things the industry can do, including better pay and other lifestyle benefits for drivers, which ultimately provide benefits to carriers, our industry and consumers. From healthcare to training programs, better hours or even just consistent routes and clear communication from the back office when they’re on the road. 

We at Trimble often emphasize the importance of safety—it’s the single most important thing when it comes to improving the driver’s experience and many other benefits follow from a focus on reducing risks to drivers. The impact of these changes can be deeper than people realize and see real advantages to a company.

Let’s dive into some key trends, especially coming out of the 2023 Insight Tech Conference. The progress of the autonomous sector gets a lot of buzz. What are you seeing?

Some companies have been building far in advance and are trying to pull at all the levels of autonomy – a tall order. However, more recently, many seem to be moving away from trying to create a solution in a siloed state and are taking a more collaborative approach that will help everyone in the end. 

I believe we'll see the application of autonomous vehicles in drayage operations and yard management, which are more controlled environments before we see widespread autonomous heavy duty long haul trucks on our highways. There's been a lot of positive, impressive progress, but I anticipate an expanded time horizon and more concentration on current applications in the near term. 

But one of the most interesting side effects is an increased focus on electrification and alternative fuel vehicles. At Trimble, we’re always looking to increase operational efficiency and support environmentally conscious, sustainable business practices. I think it will be interesting to see if and how companies consider implementing electric and alternative fuel vehicles given other priorities related to capital expenditures and technology investments.

AI is another big trend that is here to stay. How is it impacting the transportation industry?

It’s an exciting space. There are some underlying factors in our business that can help us make a big leap with AI. Having the right data and insights to create learning models that pinpoint the right outcomes is going to take our industry to another level of sophistication.

AI is touching transportation technology, and helping shippers, carriers and intermediaries try to reduce friction, lower the cost per seat and drive down unit costs during a tough market period. From an internal perspective, AI can create efficiency and productivity for employees with solutions that can give clear guidance on everything from complex route optimization to pricing and bidding to driver performance and coaching. We’re going to see user adoption increase when AI is used to augment and aid human deliverables.

Several companies are already focused on frictionless transactions to increase efficiency and pace, but we’ve seen that some carriers aren’t quite ready for it yet. Our strategic lens always points back to meeting customers where they're at, including what mediums they are working through, what marketplaces they are looking for, how their business model is set up and how we can augment that to build a bridge to the future.

The winners in AI will take over a portion of the relationship management and the mundane, repetitive tasks so individuals can be more productive, build deeper working relationships and add more value to meeting their company’s operational goals.

Stay tuned for part two of this interview! 

Are you looking to optimize your operation and better adapt to market forces? Contact our team for a no pressure consultation and demo of how our solutions can help you find advantages among these challenges.