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.
The muted demand for freight services has not put undo pressure on truck capacity; rate increases have been limited in recent years. This may be about to change. The net result of the improvements in technology is that small parcel, LTL and truckload carriers can be much more accurate in tailoring their freight rates to the “carrier friendliness” of their clients. How can shippers become more “carrier friendly”? Here are a few items to consider.
There are about 3.5 million truck drivers in the United States; the comparable number for Canada would be in the range of 350,000 people. Drivers face difficulties both from their employers and from the customers for whom they pick up and deliver freight. Drivers perform a very valuable service that is essential to the smooth functioning of our economy. They deserve our respect, in words and action.
The “bricks and mortar” grocery store delivery model and the online shopping model are quite different. Whole Foods is still a relatively small player in the overall food distribution market in both Canada and the United States. To be successful, Amazon will need to fix Whole Foods’ current business as it seeks to identify the synergies from this acquisition, while capitalizing on and mastering the supply chains from these two related but different businesses.
The field of Logistics is more complex than it has ever been. Senior logistics professionals must possess a variety of business skills and possess a depth of knowledge in a range of areas such as supply chain design and management, warehouse and inventory control, customer service, transportation and information management. This leads to a fundamental question for every organization. Does the company have a set of leaders who possess this range of skills and knowledge?