Last year, the pandemic disrupted the transportation market, throwing supply and demand out of balance. That imbalance continues today, with tight capacity, increased rates, and ongoing uncertainty for shippers. How will these imbalances impact the transportation market going forward? Is it possible for shippers to find capacity without killing their budgets? How can technology help shippers meet their service and cost objectives? Those are some of the key questions I discussed with Tracy Rosser, Executive Vice President of Operations at Transplace, and Ben Cubitt, Senior Vice President of Consulting and Network Services at Transplace, during a recent episode of Talking Logistics.
Unprecedented Market Dynamics
We’ve all experienced tremendous disruption in our lives and specifically in supply chains since the beginning of the pandemic, so I began our discussion by asking Tracy to level-set what factors are most impacting transportation today.
Tracy says, “You live through years like 2014 and 2018 and you think you’ve seen it all, and then the last 18 months come along and bring new challenges. We are absolutely living in unprecedented times. The turbulence impacting global supply chains is something we’ve never seen before. Supply chain teams are the hardest working people today.
“The biggest factor is the imbalance between supply and demand,” Tracy continues. “We have the world opening up again with demand varying across the US and across the world. The stimulus checks and the money people didn’t spend during the pandemic are adding to demand at a time when inventories have been low.
“On the supply side, there are raw materials shortages and labor shortages across the supply chain, including a shortage of truck drivers and distribution center workers. There are similar imbalances and inefficiencies in rail and ocean. Plus, there’s also a backlog of Class 8 truck orders, so getting more trucks is a problem too.”
The Impact on Shippers
I asked Tracy and Ben how this turmoil is impacting their customers. Tracy notes that many companies are still in crisis and recovery mode and are looking to Transplace to help them navigate the market. “They’re struggling with inbound transportation for their raw materials, they’re struggling with high demand and labor shortages. Consequently, their costs are increasing and their service is eroding. They’re increasingly coming to us to help them find solutions.
“There’s a need for leadership right now,” Tracy continues. “Best-in-class companies are the ones where the CEOs and CFOs are knowledgeable and involved in all aspects of the broader supply chain. What is my sourcing strategy and what does my network look like? What are my economic order quantities and what are my customer agreements? What is my manufacturing strategy? Ben says there’s a penalty for siloed behavior right now and I agree with that because that bigger picture affects transportation costs and efficiency.”
Ben adds that the best shippers today are not just focusing on fighting the day-to-day battles, they’re also focusing on getting in front of all these issues via better planning and network optimization. “For example, we’re in the middle of about 10 network optimization projects right now,” says Ben. “Just like there’s a penalty for siloed behavior, the penalty for having an inefficient supply chain is higher than ever.”
Finding Capacity Without Killing Budgets
With rising rates and increased use of the spot market, how can shippers find capacity without killing their budgets?
Ben notes that a number of their large customers are experiencing growth of 20% or more and that has the attention of the C-suite. “You can get in trouble for rising costs, but you can get removed for lack of capacity. So, it’s all about the capacity battle.
“It begins with data. Our customers who are succeeding are fighting the daily battle at the lane/SCAC level. You have to use the data to understand where the disruptions are and to find the root causes. Is it the carrier, the market, or me? Talk to your carriers. This is the time for collaboration. With tight capacity, you want to be a shipper of choice.”
Ben also sees a renewed focus on dedicated fleets and collaborative shipping, as well as using intermodal on lanes where it makes sense. He gives the example of customers getting around the imbalance of northbound shipments from Mexico versus southbound by shipping containers on barges from Mexican ports to Florida ports, then using rail or trucks to distribute from there. “Be innovative,” recommends Ben.
Tracy adds that in today’s market “there are 7 to 8 loads for every truck available, compared to 1.75 loads per truck in normal times. Dropping orders today for pickup today or tomorrow is tough in this environment. It can be done, but at a high cost.” Tracy says that companies have to look beyond the tactical and use data to consider the longer-term ramifications of how they are doing business. “Not only their networks, but how are they sourcing, what products should they sell, what are the economic order quantities, what is their use of expedited freight, and so much more. It all impacts revenue, costs and service.”
How Technology Can Help
During our conversation, Tracy related a number of key areas where data and technology can be used for analysis and optimization, while Ben talked about how to put data into actionable plans. They also shared their thoughts on how transportation procurement has changed, as well as some great insights on how companies can be innovative. I’ve only scratched the surface of our discussion here, so I encourage you to watch the full episode for all of Tracy and Ben’s insights. Then post a comment and share your own thoughts and questions.