A few key tips for surviving the current carrier capacity crunch.
“Innovate or die!”
Okay, jeez, you don’t have to yell, we’re trying.
One, that sounds like it will hurt, and two, please settle down.
The current carrier capacity crunch that the logistics industry is experiencing may seem like something shippers have weathered before, but this time it’s different. Changing technology, a growing economy coupled with growing consumer demands, and new regulations are all combining to create what many industry observers are calling “unprecedented.”
And aggressive marketing slogans aren’t going to help, save for maybe livening up a PowerPoint presentation at a trade show.
But we do get the need to inspire, maybe even put a dollop of fear into people so that they get away from the old “but this is always how we’ve done it, and it’s worked” mentality.
You know who else always did the thing that worked?
Blockbuster. Which Netflix offered to purchase back in the early 2000s.
Toys ‘R’ Us. It sued Amazon to get out of a contract when Amazon allowed other toy vendors to sell on its website. And then didn’t get its own eCommerce playbook together in time, ultimately “blaming Amazon, Target, and Wal-Mart” for why it had to close its doors.
PanAm. Remember “The World’s Most Experienced Airline”? The now-defunct international air carrier’s fall was a combination of factors, some of which weren’t predictable, a lot of which had to do with costs and poor regulatory navigation, among other issues.
Those are only a few examples, but you get the point. Every one of those businesses thought they were operating in the same environment they had weathered many times before, failing to realize exactly why this storm was different than the one they hunkered down for in the past. And each one illustrates the forces at play: regulation, prices, competition, and technology.
“You have the hours-of-service (HOS) issue, you have some economic uncertainty, technology is changing, infrastructure isn’t being fully invested in, and it’s harder for carriers to attract drivers,” explains Adam Robinson, marketing manager at Cerasis, listing off the issues that are contributing to the current capacity crunch. A third-party logistics company with a focus on technology and managed transportation services, Cerasis is dealing with the current capacity issues on a daily basis on behalf of its clients.
“And then you couple all of that with a good economy where consumers are buying, and a new regulation in the form of the ELD mandate," adds Robinson.
What’s more, new technological forces are changing the way shippers approach the supply chain, “causing chaos for in-house talent. What I mean by that is that if you have a whole bunch of different technology going on and changing your company, that creates a lot of confusion, especially if you have a lack of subject-matter experts in that company itself,” Robinson notes. “Let’s say you’re implementing an ERP or TMS — can your internal team handle all that, plus deal with the capacity crunch? There’s so much demand on you to get it right, get it to your customers on time, all while there’s a lack of trucks, all while trying to manage costs.”
So what’s a shipper to do?
Survival tip 1: Gear up
“I think it starts with making sure you have the right technology to be as efficient as possible,” Robinson says, pointing to the FitBit, technology that now gives us insight into our health that was, not that long ago, unheard of.
“There are a lot of success stories of using technology as an enablement tool. A TMS can not only better track your activity and give you visibility, but it enables you to use that data to make better decisions. For example, let’s say you have a large carrier database and your goal is to pick the least-cost carrier for each shipment that allows you to lower overall costs. But you find out that yeah, you’re saving 20 percent, but the problem is that every time you pick that least-cost carrier, they are late 90 percent of the time. You could lose a $20,000 customer to save $1,000 in shipping. If you had a TMS to give you that information, you would see that yes, a premium carrier may cost 10 percent more upfront, but you can be confident they will be on time, meeting customer expectations.”
Technology, especially a TMS, also allows you to develop a more diverse carrier portfolio, giving you a lot more options. “It decreases the time to source carriers because all of that information — your shipping activity, your contracts, all the carriers that you contracted to have available as an option — are put into the TMS whenever you make a shipment. Without it, you have to call all the carriers on your own, manage the rates and maintain the relationships, or go to a bunch of websites. It’s inefficient and leaves you with no ability to track performance systematically.” That’s time and money nobody wants to waste during a capacity crunch.
Moreover, not having a robust TMS makes auditing terribly inefficient, too, especially when you need to report to the CFO. “Technology gives you better insights into your data to continuously improve,” says Robinson.
Survival tip 2: Share your data
Unlike a literal storm, now’s not the time to batten down the hatches and keep people out. “I don’t think a tactical relationship with your carrier is going to work,” says Robinson. “You have to be collaborative, you’ve got to develop partnerships you can rely on. It’s no longer just about ‘fulfilling the need to carry your freight.’”
The importance of developing closer partnerships with your carriers is something we’ve written about before, and for Robinson, it’s integral to any successful transportation management program. “That’s keeping customers happy, reducing overall costs, and having very good buyer-relationship programs that enable you to keep up with inbound logistics, making sure that your vendors are getting material or product. My buyers expect that they can get XYZ products every time. If I’m not keeping up with carrier-relationships, not collaborating with them, not having conversations around data and keeping rates reasonable, that becomes difficult. It’s hard to have that conversation if you’re not sharing data with your carriers — carriers need to make money and if you can understand that there doesn’t need to be winners and losers, you’ll be better off.”
Survival tip 3: Look to the future, but now
Business challenges and shipping are getting more complicated and Robinson advises to continue looking for ways to eliminate inefficiencies. “Transportation management systems are probably the most innovative technology that has come out in the trucking-freight-shipping-supply-logistics space, but it’s really not that innovative because it’s been around for years — we’ve had a web-based TMS since 1998! There have been improvements, like APIs, but those are commonplace in most industries. But what about machine automation? Machine learning? Internet of Things? Blockchain? These are technologies that are not quite standard and that’s what we need to start looking at now.”
Robinson doesn’t see the current carrier capacity crunch easing until at least early spring of 2019, so it’s best to get comfortable in the current environment.