The financial impact of rapidly rising freight costs caught large numbers of CEOs and CFOs by surprise. Many companies were unprepared for the capacity challenges and financial impacts that took place. Economists are predicting solid economic growth in 2019 but not quite at the pace of 2018. What can CEOs do to protect their supply chains, the service to their customers, and their profits from further freight cost shock treatments in 2019? Here is a checklist to consider.
To celebrate the tenth anniversary of the Summit, the organizers, in partnership with the Freight Management Association of Canada, the Canadian Trucking Alliance and the CSCMP Toronto Roundtable have created an agenda that encompasses the most important issues of the day and assembled an elite group of moderators and panelists to address these topics.
Detailed, quality freight spend data can allow shippers to identify consolidation opportunities, to address chronic operational inefficiencies that result in excess or accessorial costs, to highlight “maverick” spend, to rectify the use of non-core carriers or more expensive modes and/or to create opportunities to construct more efficient routes and round trips. Shippers with poor quality and/or inaccurate freight cost data place themselves in a vulnerable position.
A company’s freight costs often represent between two and ten percent of total revenues. For many companies in the manufacturing, distribution and retail sectors, their expenditures on freight have a direct and significant impact on their companies’ bottom lines. “You can’t manage what you cannot measure.” Good quality freight data is an essential starting point in the management of freight transportation.
A number of U.S. companies told investors that rising shipping costs in recent months have cut into earnings. Many manufacturers and retailers throughout North America spend millions of dollars a year on freight transportation. Freight costs can represent between 1 and 10 percent of a company’s operating revenue, one of the largest cost items. One of the best ways to find out where a company stands in this area of rising freight rates is to conduct a Transportation Audit. Keep in mind that even a few percentage points of savings off a multi million freight spend can be a considerable amount of money.
The New Year has started off with a bang. With the stock market at record levels, unemployment at historic lows in Canada and the United States and a new U.S. tax bill that promises to put extra dollars in the hands of American purchasers, it is not surprising that consumer confidence is at a high. The strong GDP numbers reflect that people are spending money again. The result is that freight rates are projected to increase in 2018. It is against this backdrop that shippers and carriers begin preparations for the annual freight bid ritual. Here are some suggestions on how each side should prepare for this process.
The coming year is full of question marks. Can the strength of the economy and stock markets be sustained? How will the ELD mandate play out? How much will freight rates increase? Will president Trump face legal proceedings or Impeachment? Will the president precipitate a foreign policy crisis? Will supply chains be disrupted by capacity shortages? Will NAFTA be terminated and how will this play out in the three participating countries in 2018 and beyond?
While the ELD mandate itself is not expected to have a dramatic effect on capacity in the short term, the impact will come in combination with stable economic growth, the natural disasters, growth in eCommerce and driver shortages. Shippers should take a proactive, holistic, carrier-sensitive approach to protect the integrity of your supply chains. This is the time to clearly identify your true carrier business partners and formalize relationships with them.
Damco defines supply chain risk management as “attempts to identify risks and quantify their commercial financial exposures as well as mitigate potential disruptions at each node and lane in the supply chain.” Supply chain risk models can vary from the rudimentary to the sophisticated. In the case of the latter, complex “what if” analyses can be performed. This allows the shipper and/or receiver to identify potential trouble spots and map out alternative supply chain strategies.