Price Compression is a financial term where the future prospect of an asset is priced higher than its expected value; the price is ‘compressed’ and includes more ‘value’ than would ordinarily be projected for the time period. In short, it’s a linear equation and this is a math free zone so don’t stop reading.

Market Compression is different from Price Compression. Markets behave in a nonlinear manner in comparison prices. Market Compression is what happens to Jello when exposed to children. When a small child interacts with Jello, they give it a good squeeze, upon which Jello escapes the child’s grasp. It’s nonlinear and unpredictable, just like Jello, and we remain math-free, mission accomplished.

We’ve all seen extreme examples of price compression in our own neighborhoods in the recent housing market where housing prices have exceeded expectations, growing more rapidly than could have been anticipated. We have also seen price compression in historically significant cycles of rapid change such as the mortgage bubble or the ‘dotcom’ era.

In 2023, the transportation industry saw several bankruptcies among carriers, indicating financial instability and possibly overcapacity issues, the result of which is a leading cause of market compression. These developments suggest a landscape filled with capacity issues, financial challenges, even integrity issues within the transportation industry as 2023 came to a close, likely influencing all manner of business strategies moving forward.

While all markets grow and shrink, service markets like transportation react differently under compression. What makes market compression unsettling is an increase in rate of entrants and dropouts within a relatively short period creating yet more unpredictability and that’s where we find ourselves today in an unsettling period that began with Yellow on August 6, 2023.

Thoughts on Yellow Corporation Story

Yellow Corporation and certain of its affiliates and partners filed voluntary petitions under Chapter 11 and it wasn’t that no one saw it coming. Yellow Freight’s issues were widely reported for months, the company has had increasing challenges for years, even restructuring twice in the past two decades. Yellow Freight faced challenges and controversies over the years from labor disputes to financial struggles to operational and performance issues. What few saw was Yellow Freight’s complete exit once it had become clear the bailouts were not going to help the then #3 LTL Carrier in North America.

While Yellow Freight’s filing included several subsidiaries, Yellow Freight, USF Holland, and despite Roadway Express ceasing operations in 2009 Roadway was still listed as one of the affiliates in the filing. What does all this mean? It means that not only will clients continue to realign their freight relationships, but freight service providers will similarly continue to realign freight relationships for the foreseeable future. Companies like General Motors, Ford and Stellantis alongside companies like Walmart and Home Depot will all be scrambling for capacity among the top 100 LTL Carriers all of whom just moved closer to #1.

Scrambling for Capacity

Scrambling for Capacity in 2024 will extend well beyond Q1 and into Q2 for shippers and markets where once again we expect to find ourselves face-to-face with yet another round of supply chain disruption. What’s unique about Market Compression is at the same time there are shippers shopping capacity the market appears to have excess capacity evidenced by dropping rates.

Unlike some market dynamics like cost and demand that tend to have a linear relationship, market compression is non-linear. Reactions to these market circumstances encourage a three-dimensional compression such that the outward expression of the market is often unpredictable and where we would expect new leaders to emerge, and some to exit. This all takes time, and it’s beginning to take place.

Food for Thought

"What makes market compression so interesting is the simultaneous impact on shippers and markets. Reaction by shippers and markets to market compression is not universal by any means, in fact rampant unpredictability seems to be the norm."

What makes market compression so interesting is the simultaneous impact on shippers and markets. Reaction by shippers and markets to market compression is not universal by any means, in fact rampant unpredictability seems to be the norm. Some of reactions expressed by both shipper and carrier companies have been wildly unpredictable over the past 6-month period, again beginning August 6th.

Quiet Logistics, for example, has gotten very quiet indeed. A third-party logistics company headquartered in Massachusetts, Quiet Logistics specializes in order fulfillment and returns for e-commerce retailers that was acquired by American Eagle. A consolidation that sounded like a really good idea, American Eagle combined the classic ‘shipper’ with a ‘third party’ operation.

One could tender an expectation was built on cost savings for American Eagle and operating costs for Quiet. The company expanded rather quickly through several ‘quiet’ acquisitions, then “pulled back” quietly after missing financial targets. They replaced their CEO and were last reported to be “ramping down investment.” Quiet Logistics has gotten very quiet indeed.

Visiting their website, this time with a bit more scrutiny, I noticed that their web presence is based on the small screen which seems to point to an incomplete technology investment and could just as easily be a purposeful foray and specifically intended to target a younger entrepreneurial audience. Whether the small screen approach is the result of ‘built-on’ legacy technologies from several mergers and acquisitions or entirely new technology designed from the ground up is not known to outsiders and we’ll know more soon enough as the full impact of market compression comes to bear.

Moves by UPS and Ryder

Moving from the very small to the very large, has anyone else noticed the frequency and number of UPS store ads lately? Is this a predictable reaction of the behemoth UPS to the market compression; a targeted campaign aiming at small-scale shippers just to gauge the market or how smaller shippers are reacting to market compressions of their own, only time will tell.

Ryder in the meantime has continued a path of acquisitions, though not as quiet as Massachusetts’s Quiet Logistics. The Ryder acquisition of Cardinal is expected to result in a complete integration of Cardinal operations including facilities into Ryder; according to Ryder, “strengthening Ryder’s position as a leading customized dedicated contract carrier in North America” Only time will tell if Ryder management has the technology where-with-all in their Silicon Valley-Based Technology Lab which opened less than a year after Ryder acquired the logistics technology start-up Baton. Technology start-ups are risky at best, having a technology start-up in transportation tech perhaps, more so.

What to look for

I suspect larger entities will begin to double down on their previous gambles in the small-scale sector by defining and completing deeper acquisitions to complete a folio that the leaders of these acquisition-based growth companies expect will propel them into the next century. I expect that many more combined companies to struggle with integration challenges as they find their current stable of products and services challenged beyond their capacity which will be unable to keep up or grow through acquisitions of their own.

I suspect that we’ll see more from shippers like UPS and Ryder for that matter by the time the Super Bowl and post-Super Bowl advertising has eclipsed in April. Ironic isn’t it, that post-Super Bowl advertising is expected to eclipse at about the same time shippers and markets both scrambling for capacity today are expected to be exiting the darkness of the period and entering the light, shine on shippers, shine on carriers, more to come.

Maybe next time we’ll talk about how PartnerLinQ expects to help shippers and carriers overcome issues in this market where Market Compression is expected to reign large for at least the next several months if not years. e.g., how to ensure business relationships are sustained and remain connected during cycles of market compression through technology – just a few thoughts. If you have some thoughts of your own let us know, we’d love to talk about it.

Thomas Smith, Director Supply Chain Consulting, PartnerLinQ Inc.

Thomas A. (Tom) Smith is a seasoned leader in the EDI Industry and the Director of Supply Chain Consulting at PartnerLinQ. A professional services traceability, integration, & engineering manager, Tom’s real-world experience extends beyond the world’s most recognized brands and into supply chains everywhere. Working directly with industry leaders and organizations, Tom’s experience developing and delivering business processes and transaction standards across more than 26 industries has impacted brands, businesses, clients, customers, and our team member across the globe.

Modern platforms of the future are expected to create provisions for seamless and experiential integration of emerging technologies such as artificial intelligence, machine learning, and the Internet of Things (IoT).

As the supply chain ecosystems are experiencing significant impact – new patterns of needs are emerging around the greater agility in reconfiguring value chains, ability to anticipate disruptions in logistics and demand fluctuations in time, and the need for heightened visibility to support the day operational decision making. Such capabilities can equip companies to promptly respond to changing market conditions, proactively manage supply chain disruptions risks and discover and avail the new emerging opportunities in time.

“Businesses must consider breaking free from the limitations of outdated technologies and boldly step into a future defined by innovation.”

In the wake of pandemic, uncertainties and disruptions have become the new normal. Businesses are grappling with the need to continually adapt to shifting priorities which are influenced by ongoing geopolitical and economic volatility. There is stark realization that businesses cannot solve the challenges of today and tomorrow by continuing to limit themselves with technologies of the past. This situation has underscored the importance of re-imagining transformative digital information technology delivered through innovative platforms like never before.

As a result, the role of the new generation of enterprise platforms is steadily increasing. With remote work now widely adopted as the standard across the global workforce, Software as a Service (SaaS) platforms serve as a centralized and accessible hub for supply chain management. Teams can collaborate seamlessly, access critical information remotely, and maintain operational efficiency regardless of physical location. This flexibility is crucial for businesses looking to build resilience in their supply chains and navigate the complexities of the post-COVID landscape.

The dynamic nature of innovative SaaS platforms ensures that businesses can quickly adapt to evolving customer demands, market trends, and regulatory changes. Whether it’s optimizing inventory levels, predicting demand fluctuations, or enhancing digital communication with buyers, suppliers and distributors, these platforms enable a holistic approach to agile supply chain management. The ability for such platforms to provide dynamic and agile access to information, coupled with advanced analytics and collaborative features, positions them as crucial enablers of success.

Supply chains that leverage these platforms can look forward to gaining a competitive edge by fostering resilience, adaptability, and enabling timely access to insights into their supply chain operations, ultimately improving their overall business outcomes in a rapidly changing business landscape.

Instead of behaving as the isolated capability tower within the enterprise technology landscape, modern platforms of future are expected to the create provision for seamless and experiential integration of emerging technologies such as artificial intelligence, machine learning, and the Internet of Things (IoT) in SaaS platforms adding another layer of sophistication.

“We firmly believe that technology should serve as both an enabler and a game-changer, empowering businesses to operate, monitor, and act with unprecedented autonomy and agility.”

These technologies enable predictive analytics, proactive issue resolution, and the automation of routine tasks, further streamlining supply chain processes and enhancing overall efficiency.

However, in the realm of mergers and acquisitions within enterprise technologies, it’s common to witness platforms acquiring point solutions. While this expansion on paper promises enhanced features and functionalities and higher valuation multiples, these solutions often fall short when disparate technologies are patched together, leaving no assurance of seamless performance or positive customer experience.

At PartnerLinQ, we stand apart from this trend. Rooted in a tradition of solution engineering and professional consultancy in supply chain best practices, our foundation is built on decades of expertise and hands-on experience. Originally conceived by Visionet Systems, PartnerLinQ emerged as a cloud SaaS solution aimed at addressing the challenges of EDI and API supply chain connectivity. Over time, the platform has evolved to prioritize visibility enhancement and decision intelligence capabilities, catering to the evolving needs of the industry.

The resounding success of our platform has led to the establishment of PartnerLinQ as an independent entity in October 2023, extending its solutions beyond the clientele and consultancy practices of Visionet Systems. This unique blend of heritage and independence defines our approach, ensuring that PartnerLinQ continues to deliver cutting-edge solutions that drive transformative change in the supply chain landscape.

The acknowledgement of PartnerLinQ as a “Major Player” in the IDC MarketScape – Worldwide Multi-Enterprise Supply Chain Commerce Network 2023 Vendor Assessment by the International Data Corporation (IDC) represents a major milestone for our company. Playing a pivotal role in helping businesses assess and analyze the capabilities of supply chain management in this complex space, IDC’s recognition serves as a testament to our technological expertise, innovative approach, and forward-thinking vision, solidifying our position as a leading player in the industry.

At PartnerLinQ, we’ve conceived, engineered, and launched a groundbreaking platform built from the ground up. With a keen focus on the principles of organic growth and innovation, we firmly believe that technology should serve as both an enabler and a game-changer, empowering businesses to operate, monitor, and act with unprecedented autonomy and agility through seamless digitalization. As we strive to achieve continued success and sustainable value generation for our customers and prospects within the industry, the impact of analyst recognition becomes multifaceted, touching various aspects of our business trajectory. Moving forward, the PartnerLinQ team remains committed to actively engaging with IDC’s esteemed analyst team and wider analyst community, by integrating their innovative and forward-thinking ideas alongside the innovation we provide through the voice of our customers.
 

Jawad Khan, CEO & Founder, PartnerLinQ Inc.

Jawad Khan is the founder and CEO of PartnerLinQ. As the innovative force behind PartnerLinQ, Jawad guides the company in reshaping digital connectivity and collaborative intelligence within the extensive supply chain sector. His leadership philosophy is deeply rooted in ensuring that supply chains are not merely reactive but strategically positioned to respond to perpetual shifts in business demands swiftly and efficiently.

In recent years, organizations have faced a series of disruptions, impacting their operational continuity, resulting in lost sales, reduced revenues, and damage to brand reputation. This has heightened the importance for supply chain leaders to adeptly manage inherent risks by leveraging capabilities for accurate decision-making and utilizing data for improved planning.

The looming threats of shifting trade alliances, geopolitical conflicts, climate change effects on global logistics networks, and ongoing labor unrest weigh heavily on executive leaders’ minds. To tackle future uncertainties, logistics leaders are prioritizing resilient operations and flexible transportation solutions, aligning with diverse procurement strategies and meeting the demands of increasingly discerning customers.

According to IDC’s Global Supply Chain Survey 2023, business leaders, especially in transportation and logistics, prioritize improved visibility, agility, and increased collaboration. The impact of disruptions has prompted a notable focus on deploying advanced analytics to navigate changing conditions effectively.

Logistics service providers must also respond effectively to frequent and significant changes, while also balancing the push for resilient operations with the need to reduce and control costs. Economic conditions are driving concerns about higher and out-of-control costs, leading logistics teams to seek a competitive edge through efficiency gains.

Technological priorities for advancing supply chain digital maturity include artificial intelligence/machine learning, cloud platforms, and visibility platforms. Clean, timely visibility data is foundational for cultivating intelligence, enabling logistics providers to make informed, timely decisions and engage in scenario planning to drive optimal actions.

Continuous refinement of models to incorporate new data sources is also crucial for better business outcomes. Top priorities for logistics service providers include optimizing the supply chain to reduce costs and improving visibility across the end-to-end supply chain. Challenges such as generating efficiencies, facilitating better collaboration, and advancing sustainability drive the need for data-driven insights.

As organizations address inherent risks in global supply chains in 2024, the need for flexible transportation services with advanced intelligence becomes evermore crucial. Timely, informed, and consistent decision-making across complex logistics networks requires end-to-end visibility and collaboration. Logistics service providers play a critical role in achieving supply chain resilience, and platforms like PartnerLinQ enable them to deliver value, streamline operations, and contribute to long-term partnerships with customers. In a world where collaboration is essential, interconnected systems that provide insights from a single source of truth become highly valuable, paving the way for deeply integrated and resilient transportation operations aligned with customer supply chain strategies.

Learn more about PartnerLinQ and the ways of solving the supply chain challenges for both Transportation and Logistics Providers in our new IDC Spotlight Whitepaper.