These are challenging times for shippers. Driver, labor and truck shortages, port congestion, escalating freight and fuel costs, coupled with the lingering effects of Covid are making life difficult for shippers across the world. Here are a few coping strategies
1. Work in Partnership with Procurement to Create Alternate Sourcing Strategies for both Raw Materials and Transportation
Every day we read and see images in the media of containers sitting at ports, or offshore, waiting to dock at a port. We also read about embargoes and about carriers refusing to pick up or deliver to certain markets.
This is a time when Purchasing and Transportation must work together. It is no longer just a question of finding reliable sources of supply; it is also a question of whether goods can be picked up from or delivered to selected markets. Procurement and Transportation must communicate about alternate sources of supply, particularly about finding vendors in North America to mitigate supply chain bottlenecks and satisfy customer requirements.
2. Find Shipper and Carrier Partners to Optimize Shipping Volumes and Improve Negotiating Leverage
Smaller shippers with sporadic freight volumes to/from specific hard to serve markets, are facing difficulties in securing the transportation capacity they need. Here are some avenues to pursue. They include:
a) finding shipper partners to increase head haul volumes and consistency on selected traffic lanes and/or
b) finding backhaul traffic, possibly in conjunction with Purchasing, to create round trip movements and/or
c) working with a freight company such as Flock Freight that offer shared truck loading.
These options take some work and planning, but the payoff can be worth the effort in these difficult times.
3. Negotiate Contracted Rates with Volume and Service Commitments from Quality, Committed Carriers
U. S. Truckload volumes are up 11% compared to 2020. Elevated demand, coinciding with tight capacity, labor shortages, and rising used truck prices, will likely keep freight tender rejection rates above 20% this quarter. According to Truckstop.com, spot rates are currently 33% above 2020 levels. During this period of tight capacity, a reliance on the spot market can imperil service to your customers and your business.
Establishing contract rates, service and capacity commitments with quality carriers can provide you and your customers with peace of mind. Of course, some carriers will make capacity commitments to capture your business so shippers must perform due diligence on the partners that they select.
4. Expand your Routing Guide
It is always prudent to secure backup carriers. Despite the promises that you receive, some carriers may transfer their capacity to shippers that pay a higher rate. Others may go out of business or not perform at an acceptable level. As a result, take the time to identify other carriers that provide the same service. Give them test shipments and if they perform well, supply them with a percentage of your business to keep them committed to your company.
5. Monitor Carrier Performance – carriers taking loads at spot market rates and leaving your freight behind
Once you set up your routing guide, another set of activities are required. Every carrier must be monitored for tender rejections rates, on-time service, OS&D (Overages, Shortages and Damages) and billing accuracy. This type of information should come from your TMS (Transportation Management System). Managing carrier compliance is essential to the success of your supply chain.
6. Reach out to Alternate Modes, Freight Brokers and App-Based Digital Freight Matching Services
Sometimes there could be an advantage in switching modes (e.g., road to rail/intermodal, truckload to LTL). There may be opportunities to reduce costs if shipping intervals can be extended or improve service if for example, truckload capacity is limited in a certain market.
Non-asset-based freight brokers can theoretically access any fleet to move your goods. Consider adding some freight brokers to the mix to help you find capacity in selected, difficult to serve, markets. Digital freight matching services are likely to expand significantly in the years ahead. They can be as easy to use as an app on your phone or computer. It is time to add them to your carrier portfolio.
7. Use Technology
A good TMS system can make your life much easier. It can speed up the process of finding carriers that serve specific lanes pairs, improve visibility, facilitate the creation of round trips, and provide other benefits. TMS systems can be procured on a SAAS (software as a service) basis.
Following these steps may help take some of the worries out of the peak season that lies ahead.
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