Transportation Strategies: Weathering the Storm
While waiting for the pandemic to blow over, savvy shippers developed transportation strategies that are successful now and will protect them in times of future disruption, come rain or come shine.
More to the Story:
As shippers continue to navigate the challenges of a worldwide pandemic, many are finding that the strategies they used to deal with past supply chain disruptions are not the same ones needed to be successful in today's marketplace.
"Shippers have to become strategic in all aspects of managing their supply chains, including their approach to carrier relationships," says Gail Rutkowski, executive director of NASSTRAC, a shippers association for transportation and logistics professionals.
The past three years have been a roller coaster ride for shippers as they have operated in what Rutkowski refers to as "a carrier's market." In past periods of tight capacity, shippers developed relationships with key carriers while also looking at ways to create capacity—shifting modes, analyzing routes to reduce empty miles, and even adding private fleets or turning to dedicated contract carriage providers.
The current market is a "perfect storm," notes Tom Nightingale, CEO of AFS Logistics. "Truckload capacity hasn't been this tight since 2018 or 2014. Still, the overall market is unique because the capacity tightness in the truckload sector is being mirrored in less-than-truckload (LTL), parcel, and ocean.
"We've never seen all four modes at a peak like this simultaneously," he adds.
With many consumers turning to e-commerce by both necessity and choice, industry analysts predict continued growth in online shopping with no change for the foreseeable future.
At the other end of the supply chain, shippers face the realities of an issue that is affecting the entire globe, with varying degrees of severity and approaches to import and export trade.
"Port congestion and shutdowns continue to be a problem, delaying getting product on time," says Shana Rowlette, chief financial officer of Mann Lake, a manufacturer and distributor of beekeeping supplies.
"In our industry, when customers need certain products, they only need them for a small window," she says. "So if we don't provide it for them, they have to find it elsewhere."
Mann Lake serves both commercial beekeepers and hobbyists, and there are fewer schedules tighter than those dictated by nature. Failure to deliver products on time can result in lost sales and, in some instances, customers choosing other providers for their needs.
The pandemic is also impacting carriers in ways beyond their ability to meet customer needs, by limiting access to the equipment for their operations. "We ordered 10 trucks that were expected to be delivered between March and April 2021," notes a large Dallas-based products distributor. "We have been advised that the vendors that supply the components in the manufacturing process are so backlogged in their supply chains, we will not take delivery until the end of October."
Beyond potentially lost sales and delays in receiving equipment needed for operations, shippers are also being impacted financially. Budgeting for freight across all modes is more challenging than in the past, especially regarding offshore sourcing.
"The ocean market is going through turmoil never seen before," says Rutkowski. While no one can comment with any certainty about what may happen, she says, shippers' budgets have exploded as rates in some lanes have increased 100% and capacity is still not guaranteed.
The one comment that carriers, third-party logistics (3PL) providers, and shippers of all sizes agree on is there is no way to predict when and how conditions will improve.
"The bottom line: these challenges are not going away anytime soon," says the Dallas distributor.
History has proven that out of chaos often comes opportunity. As shippers continue to operate in today's environment, many have developed strategies to be successful, even in turbulent times.
Shippers of varying sizes, serving a broad range of vertical industries, share the following best practices:
Establish alternative plans to better prepare for future disruptions. Many shippers are developing Plan B scenarios in their supply chains, finding alternate suppliers in different geographies when current vendors are "in a situation where they are not able to get a truck to domestically ship product to us," says Rowlette.
For international shipments, "we are looking at stocking more product in-house or at the vendor to have it more readily accessible in case there is another disruption," she adds.
Mann Lake is focused on better planning and analysis to maximize what freight it can put on a truck/container, which reduces shipping costs as well as labor touches.
This strategy is driven largely by the continued prevalence of e-commerce and consumer expectations of visibility and service.
"Customers are ordering more online and expecting delivery confirmations in 24 to 48 hours," Rowlette says. "This means we need to be prepared with our inventory to keep customer service high."
Build and strengthen partnerships with a variety of partners. Many provider relationships go beyond transactional. For example, some 3PLs function as advisors about supply chain management and the technologies needed for strategic planning and analysis.
Mann Lake has chosen to strengthen its supply chain and requires a wide range of technology solutions, all working together seamlessly. However, the company is not alone in its quest to find not just the best solutions, but also the best ones for its supply chain.
"We have an enterprise resource planning system for purchasing products and a transportation management system for outbound and inbound LTL shipments," Rowlette says. "But beyond that, we rely on our shipping partners, including AFS Logistics, to help us with visibility."
Mann Lake also relies on AFS to find the best carriers to match its network needs. "We have relationships with tens of thousands of carriers as well as the supply chain technology and expertise to minimize price increases while still maintaining service," says Nightingale.
Whether working with a 3PL or directly with carriers, shippers agree that communication is critical. It is also good to have solid relationships in place well before a crisis of any kind occurs.
One shipper notes that his company has worked closely with a core carrier, Yellow, for years to approach pricing and service in a way that "exemplified true partnership and passion."
Having worked as a carrier for 25 years, this shipper makes it a point to understand issues impacting the industry, including driver shortages, mandates for operational changes including the requirement for electronic logging devices and other regulatory challenges.
Not only does he understand these issues, but he regularly communicates these realities with company leadership. Before, during, and beyond COVID-19 conditions, he recommends that shippers "keep everyone engaged—communicate, communicate, communicate." This philosophy applies to the shipper's employees and those who work for carrier partners.
While there is agreement across the industry that strong partner relationships are critical, cultivating them has become more challenging due to COVID-19. "The pandemic highlighted how difficult it is to develop and maintain relationships without face-to-face conversations," Rutkowski says.
COVID-19 exacerbated the issue, "but we have been seeing this for years—more and more transportation professionals attempting to run their entire network from their laptops," she says. "While transportation technology is important and necessary, it becomes clear that you cannot purchase a high-value asset—human beings—the same way you buy staplers."
Analyze the entire supply chain to find opportunities. Mann Lake is looking beyond immediate challenges to find ways to improve all aspects of its supply chain, including questioning past practices and thinking.
One example has to do with product distribution. Today, the company operates with a centralized supply chain; all products flow to one distribution center for processing before being sent to regional distribution centers for final shipping to dealers, stores, or customers.
"We are looking at changing our inbound strategy," says Rowlette. She acknowledges that it may be more economical from a freight spend perspective to bring fewer shipments into one location.
"But when you look at the staff needed to unload the product, receive it into our system, and then prepare it to go to another warehouse, paying a little more to ship products directly to all warehouses, with freight being processed only once, becomes a better solution," she adds.
Mann Lake is not only evaluating its supply chain internally, it has also brought in third-party resources to help do a complete analysis and re-map its processes.
The value of a third-party logistics provider in leveraging not only relationships but also data and critical insights is a primary reason that "the shippers who will be most successful will seek out non-asset-based 3PLs to assist in a holistic review of their supply chains," Nightingale says.
Similarly, shippers are working with LTL carriers like Yellow to find ways to meet customer needs through transparency and collaboration.
"Obviously, COVID-19 was not on anyone's radar," comments one shipper. "But a constant dialog with core carriers and a genuine understanding of the issues they face has helped us forge ahead with our routine shipments and even assist many of the personal protective equipment providers that have emerged."