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.”
(When Chris Caplice, executive director of MIT’s Center for Transportation and Logistics, quipped that spot was “literally a four-letter word,” Simpson amended her statement, “a four-letter bad word, I should say.”)
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.