Creating a Freight Capacity Plan for Your Company

The traditional and social media remind us on almost a daily basis that we are seeing the first manifestations of a looming capacity problem.  There are already capacity shortfalls in certain geographic areas using specific modes of transport.  With 15 to 20 percent of truck capacity removed during the recession and reduced driver availability, this may set the stage for challenging times for shippers in the years ahead as they seek to find reliable means of moving their freight.

The good news is that there is much a logistics professional can do proactively to make sure they protect the integrity of their company’s supply chain.  Here are some suggestions.

1. Think Strategically about your Supply Chain, not just Tactically about Transportation

Whether it is sourcing raw materials or shipping to customers, many organizations have options.  There may be alternative sources of supply, either domestically or in other countries.  There may be a variety of methods in bringing goods to market.  This may include shipping to a warehouse or direct to customer, varying order cycle times, changing manufacturing parameters, shipping more volume on slower freight days,  increasing safety stock levels, switching modes and a host of other variables.   This can also include relocating a warehouse to a more carrier friendly location where head haul or back haul traffic is easier to find.

In other words, it is not just about finding more carriers to handle your current volumes under the existing supply chain paradigms.  Securing capacity may require a number of strategic changes to the design of current supply chains. 

2.Take a more Strategic and Enlightened Approach to Rate Negotiations

After driving their freight costs down during the recession, many shippers are under the delusion that low freight rates are just one more freight bid away.  While freight bids have a valuable place in strategic sourcing, they represent only one tool in the cost containment arsenal.  Carriers with good service and limited equipment have come out of the recession with a greater focus on yield management.  While there may be some renegade carriers that are willing to break ranks and offer low rates, the overuse of freight bids results in the law of diminishing returns. 

Success in rate negotiations must come from clever leveraging of one’s freight, flexibility and shipper salesmanship.  Shippers must now present their freight in a way that makes it more desirable for their carriers.  They should provide them with quality freight forecasts and schedule loads on dates and times that help their carriers improve their profitability.  The freight should be operationally as clean to handle as possible (e.g. the paperwork is ready on time, the freight is packaged in such a way as to make it easy to load and unload with minimal weighting time, carriers have set pick-up or delivery appointments so there is no excessive waiting time).  Shippers can also make their freight more attractive by providing their carriers with return trips or continuous, wherever possible.

3. Be Open to Alternate Modes of Transport

If truckload capacity is tight on a certain corridor, would a switch to LTL make sense?  Can the LTL be consolidated so as to enjoy LTL capacity while taking advantage of partial truckload rates?   In the reverse, is it possible to combine LTL freight with freight from affiliated companies or even competitors?  Has your company ever considered switching some of its freight to intermodal service, particularly on longer lengths of haul when there is a buffer on delivery requirements?  Would a dedicated fleet operation provide consistent capacity at a reduced rate?

In summary, changing times require new ways of thinking.  In particular, a more strategic approach to supply chain management rather than a tactical approach to Transportation may be the key to unlocking more freight capacity for your company.