J.B. Hunt: Leading the Way into the Age of Digitized Trucking
As freight trucking supply chains are pressed for efficiency gains, what are the digital innovations that will set the industry leaders apart from the obsolete?
Fall 2010. Ray Sakultarawattn receives a dispatch through his in-cab Qualcomm navigation system to pick up a high-dollar load of LG flat screen TV’s at a warehouse on the outskirts of Chicago and transport them to a distribution terminal in Gary, Indiana. Paid by the mile, Ray jumps on the task and arrives at the shipper’s destination promptly, only to be told the load isn’t ready yet. He proceeds to wait eight unpaid hours while the cargo is prepared and loaded before trucking it only thirty-nine miles north to the terminal where he drops it and hooks a new empty trailer in anticipation of his next load. This fall is particularly bad, and full stints filled with dispatch failures like these are not entirely uncommon. [1]
Such inefficiencies coupled with per-mile compensation incentives for drivers leave no question as to why the industry is facing an ever-worsening shortage of truck drivers, a phenomenon that is significantly affecting freight costs and causing consistent service disruptions. [2] To make matters worse, the trucking industry faces new volume demands posed by a dramatic growth in e-commerce as Americans buy more and more of their goods online (in 2016 alone, ten billion tons of consumer goods were transported across the United States by truck, accounting for 80% of total nationally transported freight). [3][4] Faced with these challenges, it is apparent that those trucking companies altering their operations to support innovative approaches to logistics will maintain competitive advantage in the coming decade.
J.B. Hunt, one of the largest transportation, delivery, and logistics operations in the United States, is one of the companies making necessary changes. In their annual shareholder meeting this year, they announced the launch of J.B. Hunt 360 Marketplace, a new platform intended to connect shippers and carriers using real-time data and artificial intelligence. The platform matches freight with capacity, pairing appropriate loads with nearby carriers to facilitate efficient connections and enable cost savings. [5] Implementing this kind of dynamic automation to replace human-directed dispatching systems optimizes routes to better utilize drivers like Ray while offering much-desired visibility to shippers, carriers, and customers alike.
J.B. Hunt 360 Marketplace is only the company’s first step to embracing the era of digitized trucking. To continue efforts to revolutionize their current supply chain, they have dedicated $500 million to “enhancing their operating systems, developing cloud infrastructure, and creating further innovative and disruptive technologies” over the next five years. [6] While this announcement proves this company’s desire to further adapt to persistent global trends, they are not explicit in their long-term plans.
There is some widespread thought that the future of trucking lies in the connected truck. The connected truck makes obsolete the notion of a single truck rolling down the road and instead embraces the still-fictional idea of an automated fleet utilizing autonomous driving, remote diagnostics, and vehicle-to-infrastructure and vehicle-to-vehicle communication. [7] While the connected truck makes for exciting conversation, it still lacks widespread proof of concept, and thus further advancements in digital logistics are more enticing to consider as concrete means of continued optimization.
I think J.B. Hunt still has an opportunity to capitalize on likely cost savings and efficiency gains by focusing on further digitization of their supply chain. While J.B. Hunt 360 Marketplace seems to be cutting edge compared to competitor technology, there are a number of companies specializing specifically in developing SaaS technology products meant to help connect each step of the end-to-end logistics chain. In my opinion, it would behoove J.B. Hunt to spend time and resources investigating a potential partnership with a startup like project44 or omnitracs, who have both received significant positive press from developing software that promises quote-to-invoice automation and productive fleet management, respectively. [8][9] Through such a partnership, I think J.B. Hunt would be able to maintain agility as digitization demands new changes from the industry over the coming decades.
Still, what J.B. Hunt is implementing and might implement to revolutionize their own supply chain is not fundamentally revolutionary in and of itself. As other companies recognize the need to digitize their own supply chains, how will J.B. Hunt maintain their advantage as an industry leader? Are there futuristic challenges J.B. Hunt can start to address now, both in looking at supply chain opportunities and beyond, to stay ahead of the curve?
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[1] Ray Sakultarawattn, Interview by author, phone interview, November 8, 2017.
[2] Hokey Min and Thomas Lamber, Transportation Journal Vol. 42, No. 2 (Winter 2002), “Truck Driver Shortage Revisited”, pp. 15-16, via JSTOR, accessed November 10, 2017.
[3] Texas A&M Transportation Institute, “New Delivery Methods, New Transportation Challenges in the Era of E-Commerce,” https://tti.tamu.edu/2017/09/11/new-delivery-methods-new-transportation-challenges-in-the-era-of-e-commerce/, accessed November 2011.
[4] American Trucking Association, “When Trucks Stop, America Stops” (PDF File), downloaded from American Trucking Association Website, http://www.trucking.org/ATA%20Docs/What%20We%20Do/Image%20and%20Outreach%20Programs/When%20Trucks%20Stop%20America%20Stops.pdf, accessed 9 November, 2017.
[5] [6] Business Wire, “J.B. Hunt Transport Services, Inc. Launches Marketplace for J.B. Hunt 360”, ABI/INFROM via Proquest, accessed November 2017.
[7] PWC, “The Era of Digitized Trucking: Transforming the Logistics Value Chain” (PDF File), downloaded from Strategy& website, https://www.strategyand.pwc.com/media/file/The-era-of-digitized-trucking.pdf, accessed 10 November, 2017.
[8] Project44, “Make LTL Transportation Easier and More Profitable,” https://www.p-44.com/products/ltl-automation-solutions-3pl/, accessed November 2017.
[9] Omnitracs, “Vehicle Fleet Management Systems for Productivity,” https://www.omnitracs.com/solutions/productivity, accessed November 2017.
We often hear about autonomous vehicles, but I enjoyed your discussion of how J.B. Hunt is utilizing technology to automate dispatch. I think your suggestion to automate other ancillary logistics tasks, such as quoting and invoicing, is spot on. However, I would worry about partnering with a third-party for these technologies, since it will make integration with their other systems more difficult and they could be vulnerable if those companies are acquired. Perhaps J.B. Hunt could consider acquiring project44 and omnitracs, and develop these technologies in-house to maintain a competitive advantage? They could also leverage that talent to bolster their own 360 Marketplace efforts.
In the long run, J.B. Hunt faces a significant threat to their industry leadership as a result of driverless technologies. As far as I know, they are not actively developing autonomous vehicles in-house. For J.B. Hunt to maintain its edge in this futuristic scenario, it needs access to driverless technology at a reasonable price, and to continue to control the customer relationship. As far as sourcing the technology, I believe J.B. Hunt should avoid the temptation to single-source. Although having a single supplier for their autonomous vehicles could help reduce operating costs through economies of scale, it will also give that technology provider significant leverage over J.B. Hunt and potentially erode margins over time. As far as controlling the customer relationship, I see the the efforts to improve information systems for drivers that you discussed as laying the groundwork to communicate efficiently to a fleet of autonomous vehicles in the future. If they can continue to drive these efficiency improvements in the customer-facing roles, then they will make themselves more difficult to displace.
Great article Sar-Bar! Sounds like JB has gone in a similar direction to Schneider by automating dispatch in order to achieve improved operating efficiency through increased utilization. I agree with both your and Rob’s note above that continued investment in dispatch and routing by JB will be crucial to its continued success. To address future challenges, I would suggest scaling up quickly through the acquisition of small and medium size players in order to stay in level footing with growing customers and consolidating industries. Regarding major technological advancements such as autonomous trucking, I would not make a material investment in this business at the current time. The likelihood that these trucks hit the road in the next 5-10 years seems bleak given the regulatory issues around the topic, as well as the high upfront cost of autonomous vehicles that would squeeze the already tight margins seen across the industry.
In reading your paper, I had become excited about a potential merger with Schneider, given they both seem to be on the cutting edge of technology within the trucking industry. Thinking about it now, a merger of these two businesses sounds increasingly difficult, as each companies’ employees and customers become more and more reliant on their unique operating systems. Given all of the recent changes, it will be very interesting to see how this industry unfolds over the next 5-10 years.
What say you on the anti-trust front of merging Schneider and J.B. Hunt? No concerns, Matty?
Nice article, Sarah, and well-timed with the recent Tesla announcement. On your point around connected trucks, I agree that this is where the industry is headed, but my main question revolves around how long it will take the industry to get there. As Matt pointed out in his comment, the likelihood of reaching this goal within the next 10 years seems bleak, but I believe they can quickly find themselves behind the curve if they don’t start to make the necessary investments and consider the impact of what an automated fleet might have on the company financials in the future.
Although a material investment is likely not warranted at this time, one way in which they could potentially start to prepare for the future of connected vehicles is to launch a pilot program that will test the feasibility of connected vehicles. For example, they could form a partnership with Tesla, who will begin producing a Tesla Semi that will have an enhanced Autopilot System and will begin delivery in 2019 (http://bgr.com/2017/11/17/tesla-semi-trucks-price-specs-release-date/). By launching a pilot program with Tesla Semi’s, they will begin to understand how a fully-connected truck might affect their operations in the long-term, while still deriving short-term benefits like improved safety with a reduction in driver blind spots.