Helping Manage Spot Market Cycle

Rob Segsworth is a Head Vice President, Land Transport (Canada) at DB Schenker based in Essen, Nordrhein-Westfalen. Previously,  Rob was a Director, Trade Management and Financial Recovery & Claims Director, Trade Management and Financial Recovery & Claims inLivingston International.  Rob is a teacher by trade. He has also worked in logistics and supply chain transportation for the past 28 years.

How are you helping clients manage through the contract vs spot market cycle and 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 increases, hence reducing capacity and causing rates to rise. To explain better, trucking companies often increase its capacity, equipment, and resources in order to meet increased demand and capitalize on a booming industry. But eventually when the new economy softens all those new trucks wind up without capacity and  rates begin to decline. As a result, spot markets become extremely volatile from a price standpoint.

Being an ongoing cycle this was not a great problem until in Q4 2021 and Q1 2022, when we faced   driver shortages, rising pay rates for drivers, and a lack of new equipment in the global supply chain occurred. All of these factors, including a high demand for freight, port congestion, the movement of additional freight through truck, and rail congestion at rail yards, created a perfect storm, which was like a market correction for everyone. As a result, the industry became very carrier centric.

However, now as the economy has evolved and the demand for freight has decreased, consumer spending has shifted away from products and 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. This because we have more capacity available within the business, shippers are currently in a favorable position, allowing them to participate in the spot market and obtain more beneficial prices.

We strive to help our existing clients comprehend the high 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 time period. This helps our clients to have a good budgetary viewpoint, and it also enables them to feel certain that they have capacity secured. 

What are some of your recent project initiatives?

Schenker Canada is positioned in the market as a light asset-based 3PL firm. We have our own terminals in Montreal Mississauga, and our trucks handle 94% of the Ontario population and 65% of the Quebec population. But outside of that, we also rely heavily on our partner network. Using a network of long-standing partner carriers that represent ourselves, we represent our clients at a very high level, and it also provides capacity and pricing consistency. As a result, we are able to provide our customers with stable and reasonable rates.

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

The volatility that the market has experienced over the past 12 to 18 months has been of great benefit to our customers. As when everyone in the world has had to deal with ridiculously high levels of inflation, we've 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 on the extremely volatile spot market. Secondly, recently Schenker 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 client base. Additionally the other project that we're working through is building a T M S or transportation management system which will give the visibility on carrier availability, 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 movement from e-commerce Company to consumer shipping. And in this new changing environment if a transportation provider is unable to adapt to changes in demand and mode of transportation, they risk falling behind. I believe Schenker has been fortunate in being able 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, full truck load, intermodal, small parcel and fulfill all of their demands.

Undoubtedly, there will be worries about a recession as 2023 approaches. However, I think the ground transportation industry will be less affected by the recession than others, especially if they continue to be adaptable and agile enough to keep one step ahead of the competition.

What would be you piece of advice for budding professionals in the field?

It is important for shippers to 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 allows the market to work in favor of shippers when it is advantageous. Moreover,  to be expert in the field, one should find every possibilities that is there in the market to learn and grow. Join an organization where you have the potential to be empowered to provide value, to learn, and to advance. One of the primary reasons I joined Schenker four years ago was that I wanted to work for an organization where I could influence our customers and help in development of the business.