January 2022 | Sponsored | Knowledge Base

Transportation Spend Management in 2022

Tags: Finance, Transportation Management, Transportation

Shippers using data intelligence can often insulate themselves from transportation management challenges and at the same time, reduce logistics costs. Here's how:

Ken Adamo, Chief of Analytics, DAT Freight & Analytics, 800-547-5417

Supply chain upheavals made transportation spend management extremely difficult in 2021. We can expect a volatile market to continue, because the factors that affect spot rates and freight volumes aren't going away anytime soon, including constraints on new truck builds, depleted used truck inventory, severe driver shortage, growing freight demand, and supply chain disruption.

A transportation market correction is coming, but disruption still looms.

Assuming supply chain backlogs and equipment imbalances dissipate following the peak season, a transportation market correction is likely coming in 2022. When it does, shippers can expect transportation pricing to return to a normal rate of inflation rather than a steep pullback.

Until then, inventory replenishment will be an ongoing effort and will create a ripple-down effect for many shippers. For some, delivery delays will result in a surplus of untimely or misplaced product. Others will grapple with a returns process that echoes the historic spike in e-commerce since COVID-19 emerged. Capacity constraints will continue.

To plan for market corrections—or disruptions—and develop response strategies, you need to know which areas of your network are the most susceptible to transportation spend management risks.

Expect logistics cost pressures to persist.

Truckload rates at record highs triggered an unprecedented number of new entrants in the carrier marketplace. Anticipated cost increases in 2022 will hit new carrier operations the hardest, especially as inflationary pressure drives up truck and trailer prices. Driver compensation and diesel fuel prices are two more looming carrier cost drivers in 2022, according to American Transportation Research Institute (ATRI).

Meanwhile, brokers are paying more for capacity as they solve difficult challenges during high demand. At times in 2021, as much as 25% of total truckload freight moved on the spot market. Pre-pandemic, 13% of shipments were spot moves. That uptick adds production costs for brokers on top of increased transportation rates, so operating margins are shrinking while volume grows.

As increased market demand continues to stretch capacity thin into 2022, expect higher quotes for short-term contracts and higher premiums in the spot market. Knowing the current rates in this environment can help you improve your negotiating position and your ability to control transportation costs.

Transportation analytics enable better spend management.

When 2022 brings unplanned freight volumes, network disruptions or difficult conversations about transportation costs, effective spend management will depend on in-depth and accurate insights on rates, carrier performance, and market forecasts.

Intelligence-based carrier sourcing solutions help you access a complete picture of transportation providers who have capacity to service lanes where you need additional volume.

Freight rate analytics with broad, deep data sets, and rate lookups for single or multiple lanes can help you evaluate mini-bids and quotes from carriers in the spot market. These current market rate insights ensure you get fair prices in every demand environment.

At the same time, rate forecasts on key lanes—both daily for the coming week and weekly for the coming year—empower you to pinpoint the biggest expected increases. This might highlight a need for alternative plans or a review of your current contract rates to make sure they stay in alignment.

To further support strategic planning, granular benchmarks on network performance identify where your carrier- and lane-level costs surpassed market averages last year, so you can more closely monitor and plan for those costs in 2022.

Combined, these solutions allow you to navigate logistics challenges while improving transportation spend management in the year ahead.






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