Load and Expedite
If you have spent any time in manufacturing logistics you can appreciate the classic problem of, 'Load and Expedite.' At Crane Worldwide Logistics®, we see the same thing all over the world with clients in nearly every industry. By not having adequate logistics visibility, setting proper tolerance levels and accurate production forecasting, companies are being forced to rely on expedited freight to meet their manufacturing demand. Even the most experienced companies and logistics professionals can get this wrong, and the dirty secret is it will not improve or become easier any time soon.
The first thing to consider is the overall market. In general, the economy and manufacturing both domestic and abroad are doing quite well. Where the norm has been around 3% growth, many industries are experiencing double digit growth. This is stretching supply chains that are already near capacity. The second market force to consider is the driver shortage. The supply of drivers is decreasing while the demand is growing. These market forces considered separately are a headache but when put together create massive challenges and significant cost increases.
On the client/business side of the equation, as a global freight forwarder, we see several reoccurring problems that on the surface seem innocuous but can easily snowball. The first is demand projections for lower tier suppliers. Companies generally give good production estimates for their top suppliers but quite often miss when it comes to their lower tier suppliers, resulting in the need for expedited shipments since these smaller suppliers cannot keep pace with the growth demand.
The second issue we see is visibility to accurate raw-on-time numbers. When companies and carriers are not working from the same definition of "on-time" it can cause significant shortages. Last but not least, companies and drivers are often sitting on freight. While a driver waiting for a load for an hour does not seem like a major issue, repeating this practice hundreds or thousands of times during the course of a year can add up to missed miles and increased inefficiencies. This scenario adds tremendous waste to the supply chain and also irritates the drivers.
The last group of challenges to consider are changes in the macro environment and anticipation of the future. It is critical, when building a supply chain, you consider what is likely and unlikely to happen in the next year or two from a macro perspective. Here are a few things as a freight forwarder we are keeping a close eye on and you should too:
- 301 tariffs with China: If these go into place there is a significant chance manufacturing may shift locale.
- Trade agreements: The current administration has put these on the table and they have the ability to drastically impact duties and duty avoidance.
- Driver Supply/Prices: There is more freight than can be moved by the supply of drivers and they know that, price increases are coming.
- Ocean & Air Freight: This portion of the supply chain is fairly stable and there should be no major change in the supply of boats although there may be issues with aircraft due to rising e-commerce demand.
Over time, all of these obstacles can drastically increase your freight spend. There is no doubt the price of domestic freight is and will continue to go up over the next few years. This increase makes it even more important for businesses to get these fundamentals right to drive better efficiency.
- Ensure your logistics provider has a solid cross-dock footprint with local pick-up and delivery.
- Demand planning/forecasting for your tier 2, 3, 4 etc. suppliers are adjusting for growth and retraction.
- Understand the macro factors that impact demand.
- Clear visibility to your freight and understanding of true raw-on-time percent.
- Build relationships with freight providers.
- Evaluate repackaging and consolidations to save valuable business days.
- Look at boxing/crating customizations.
- Eliminate driver dwell time.
- Be honest with what you can and can't do in house, 4PLs are a valuable option.
There are a lot of moving parts in the production of a product. The key is to value stream your supply chain to make sure everyone understands the risks and rewards. Sometimes leaning out the supply chain without considering all the factors can cause serious issues. Taking recommended steps and utilizing best practices will not eliminate all 'Load and Expedite' shipments, but they can reduce the frequency.