A Glimpse into the Transportation Industry

With over two decades of experience in the logistics and supply chain industry, Rob Segsworth is currently acting as the vice president, Land Transport (Canada) at DB Schenker. Before joining DB Schenker, he was a Director, Trade Consulting at Livingston International. He has worked in logistics and supply chain transportation for the past 28 years.

How is DB Schenker helping clients manage volatility in the North American trucking market?

There is an ongoing cycle between spot and contract prices in the trucking and transportation industry. A typical economic cycle in the trucking sector occurs when freight demand exceeds truck capacity, causing rates to rise. To explain better, trucking companies often increase their capacity, equipment, and resources in order to meet increased demand and capitalize on a booming industry. Eventually, however, when the economy softens and consumer spending shifts away from commercial goods, all those new trucks wind up without capacity, and rates begin to decline as carriers compete for available loads. As a result, spot markets become extremely volatile from a price standpoint.

This polarizing cycle was further magnified in Q4 2021 and Q1 2022; we faced driver shortages, rising pay rates for drivers, increased costs of equipment, and higher costs of borrowing. The rising demand for truck capacity at this time, was multiplied by challenges such as high fuel costs, port congestion, rail yard congestion, and vaccine mandates for drivers. This created a perfect storm for everyone in the industry and created a shift from a shipper’s market to a carrier market.

Now, as the economy has evolved consumer spending has shifted away from products toward services. This has reduced the demand for trucking capacity significantly. Consequently, the spot market has begun to become more attractive in terms of pricing. Today we see more capacity available within the industry, allowing shippers to participate in the spot market and obtain beneficial, yet transactional, rates.

We strive to help our existing clients comprehend the highs and lows of the spot market cycle and when it is advantageous to participate. 

We also strive to provide clients with competitive, fair contract rates that they can rely on for an extended period. This helps our clients from a budgetary viewpoint, and it also enables them to feel certain that they have capacity secured and not have to compete for capacity as the spot market cycle transitions from valley to peak.

What are some of your recent project initiatives?

DB Schenker is positioned in the market as a light asset-based 3PL firm. We have our own terminals in Montreal & Mississauga, and our trucks service 94 percent of the Ontario population and 65 percent of the Quebec population. With our extensive partner carrier network, we provide our clients with consistent capacity at competitive rates.

During the highly volatile period of the past 12 to 18 months in the market, our stability has provided great benefit to our customers. While everyone in the world has had to deal with high levels of inflation, we have been able to keep rates for our existing customers well below these inflationary levels. Therefore, one of our first recent initiatives was to secure rate commitments and capacity that we could make accessible to our customers during the extremely volatile spot market peak cycle. Secondly, DB Schenker recently acquired USA Truck, a significant asset-based business, and we are in the process of integrating, identifying synergies and using their asset base and network to deliver more value to our collective client base. Additionally, the other project that we are working through is building a Regional Transportation Management System (TMS), which will give visibility on carrier availability, and carrier rates, optimize synergies, explore round-trip opportunities, and find backhaul opportunities that will benefit our customers.

How do you envision the future of the space?

During the pandemic, there was a significant shift toward e-commerce businesses. In this changing environment, if a transportation provider is unable to adapt to changes in demand and mode of transportation, they lose market share to competitors. DB Schenker has been fortunate to keep ahead of that curve by being adaptable and responsive to changes in customer demands. We were able to provide value to our clients via various types of transportation, whether it is LTL, FTL, intermodal, or small parcel – providing customized and flexible solutions.

"We strive to help our existing clients comprehend the highs and lows of the spot market cycle and when it is advantageous to participate."

Undoubtedly, there will be worries about the scale of recession as 2023 progresses. However, the transportation industry will be less affected by the recession than others, provided service providers stay creative and proactive – a strength of DB Schenker.

What is your advice for customers and professionals in the logistics industry?

From a customer perspective, shippers must appreciate the value of partnerships and ensure that their carrier partners or transportation service providers are available when the cycle shifts, and the market becomes less favorable. This partnership can allow the market to work in favor of shippers if your logistics provider helps you time the cycle correctly.

From a logistics professional perspective, join an organization where you are empowered to provide value, learn, and advance. One of the primary reasons I joined DB Schenker four years ago was that I wanted to work for an organization where I could positively influence the service to our customers and help in the development and direction of the business.