Having available capacity means more than having enough trucks, rail or steamship carrier assets to manage your business. Rather, it’s about winning the ongoing competition between shippers and third party logistics (3PLs) providers to secure those assets in order to maintain supply chain velocity. With capacity in a constant state of flux, it’s critical that shippers and 3PLs maximize efficiencies and assist carriers in maximizing the utilization of available assets.
As capacity tightens in most markets due to the ebb and flow of economic conditions, logistics departments must have the right tools to pick up new capacity and avoid losing existing carriers to competitors. Here are the top five ways to protect capacity – even during capacity crunch:
1. Build a Reliable Carrier Network
Building carrier partners and establishing an extensive qualified carrier list will ensure your company has the assets it needs during capacity constraints. With more than 100,000 North American truckload carriers, you can secure truckload capacity by first identifying credible carriers that share the same values as your company. This will help build and solidify the relationship over time. Next, align your service level expectations by rewarding outstanding performance and standardizing metrics about on-time delivery, invoice accuracy and communication. Last but not least, create efficiencies and offer value to your carriers, shippers and 3PL, such as reducing costs and improving carrier margins, among others.
2. Max Out Your TMS Benefits
The effective utilization of order management and transportation management systems (TMS) can electronically broadcast logistics requirements to the market, identify available trucking assets in the network and quickly match capacity to your needs from a qualified list of carriers. The systems’ intelligence can also locate available trucks by geographic area and match those to open orders. TMS reporting can identify opportunities for maximizing load fill across all modes and pinpoint opportunities to consolidate less-than-truckload (LTL) loads across inbound, outbound and multiple shippers.
3. Maintain the Option of Dedicated Fleet Services
Maintaining a private fleet guarantees capacity during capacity crunch. While this approach may solve the problem, it does so at higher cost and with greater risk for the shipper. Essentially, the shipper becomes a carrier – owning and maintaining a fleet, hiring and managing driver logs and hours of service requirements, along with all the other DOT requirements (not to mention increased insurance cost and exposure to risk).
A viable option to private fleets is the use of a virtual fleet where carriers provide driver, tractor and trailer capacity for dispatch by the shipper or their 3PL. Dedicated virtual fleet services are only sustainable when combined with a TMS and/or outsourced carrier operations. Protecting capacity during times of surge by utilizing a virtual fleet is a smart idea. Not only does the use of a virtual dedicated fleet guarantee capacity, it also minimizes supply chain disruptions, enhances customer service, provides scheduling flexibility and can be designed to meet specific or changing needs. Additionally, for shippers with enough freight volume on competitive lanes, a virtual fleet can also be a viable alternative.
4. Leverage Insider-Intelligence from the Experts
Small and mid-sized companies without in-house logistics expertise or the budget for a TMS should engage a 3PL to access important technology, knowledge and network resources.
By maintaining data on different freight markets and carriers, a 3PL can match your volume to a carrier’s complementary or empty return lanes and identify why freight may not be attractive to carriers. This might include plant delays impacting loading times, cancelled or re-booked loads, consignees with unloading delays, poor treatment at plants, slow freight payment and more. A good 3PL will work with carriers to solve these issues with the shipper or consignee and expand carrier capacity by focusing on continuous improvement beyond rates alone.
5. Integrate Logistics and S&OP Functions
Minimize utilization disruptions by integrating your logistics management team with the supply chain and S&OP team. With representation from each of the stakeholders, your most critical functions can be aligned to plan for times of surge, product shortages or prepare for when turbulent economic conditions strike.
Often, I’m told by logistics professionals that they “live in a land of constant surprises” – everything from new product introductions and plant shut downs to product price increases and raw material shortages are not communicated to logistics departments or 3PLs. Keeping an open dialogue between the stakeholders and eliminating silos within your organization should be a top priority. Often a 3PL can be used as the sounding board to present issues and alternatives that might not otherwise be viewed as politically correct.
When it comes to protecting your company from capacity constraints, the name of the game is to be prepared – this includes having a strong contingency plan in place. To achieve this, take a hard look at your end-to-end operation to identify inefficiencies directly impacting your supply chain’s reliability and competitive advantage. Once these issues are mitigated, you can build upon a solid foundation and begin implementing and nurturing the aforementioned tactics, always remembering that capacity is not just a numbers game – but rather a competition between shippers and 3PLs to maintain supply chain velocity.
“By failing to prepare, you are preparing to fail.” -Benjamin Franklin
Edward R. Hildebrandt is Senior VP of Business Development at CLX Logistics, LLC. He began his career in information technology where he worked in sales, marketing and general management for IBM and Digital Equipment. His career in chemical logistics began in 1991 with Chemical Leaman Tank Lines where he served as Director, National Accounts representing Chemical Leaman to some of the world’s largest chemical companies. In 1997, he joined Leaman Logistics as Vice President and General Manager of Intermodal Services and continued in this position when Leaman Logistics was sold and became part of GATX Chemical Logistics. In 2001, he took over as Senior Vice President Operations for CLX Logistics.