Are We Still in an Era of Continuous Improvement?
Noël Perry, Founder and Principal of Transportation Economics gave a keynote presentation recently at the IGNITE Supply Chain Conference in Philadelphia. His presentation, “Transportation: A Year on the Edge,” focused on the underlying fundamentals of transport demand, operations and competition. In short, Noël listed five old rules of transportation that no longer apply while offering up the new rules replacing them. Supply chains will be dramatically impacted.
This week and next, this blog series will cover each rule change individually while offering up strategies to navigate a successful transition. Be sure to complete the "subscribe" form on the blog stream of this resource hub in order to receive notifications of new updates.
The First Rule Change
Old - We live in an era of continuous improvement in transportation.
New - We live in an era when transport is becoming more fragile, slower and less reliable than it used to be.
Gone are the days when a shipper can contract with a carrier of choice and name the freight price he will pay. Truck capacity used to run in the low 90s, with a peak year at 95%. During the recession, shippers were able to negotiate substantial freight rate reductions due to excess capacity.
Today, capacity is at a tipping point, running at 99% and more, with little to no room for increased demand. If there is a sudden surge in demand, or there is an unexpected loss of a transportation mode, or disruption from port strikes, weather, or other factor occurs, then shippers may experience not only freight price increases, but the inability to contract with a carrier to make their shipment.
According to the State of Logistics report from the Council of Supply Chain Management Professionals (CSCMP), by 2017 US supply chain managers will be less concerned with paying higher trucking rates than being able to find trucking container space available to haul their freight.
While today carriers have the upper hand in negotiating rates due to the capacity crunch, shippers can still do a few things to address this issue, including:
Increase visibility in transportation processes down to the granular level to find areas for trimming costs
Open communications with trading partners via a supply chain operating network to improve collaboration and negotiate continuous moves or consolidation of shipments
Become a preferred shipper by paying carriers on time and with the correct amount
Treat carriers and drivers as respected, valued partners so they will want to work with your business
Lower dwell times with scheduled appointments ensuring resources are available to help with loading and unloading
Share shipping schedules and load information and requirements so carriers know exactly what you need
While the capacity crunch is only going to get worse, there are still things that shippers can do to become a better transportation partner. Using a supply chain network opens the lines of communications, collaboration and sharing between trading partners, offsetting capacity crunch issues with best practices that serve to make the challenges less daunting.
The second rule change - next in this blog series - focuses on the question "Is it really all about volume?"