By Darren Miesner, Vice President of Operations, Transplace
It’s a captivating time in the logistics industry. Increased demand and customer expectations are putting on-going pressure on shippers to deliver on-time-and-in-full without comprising their bottom line. And while capacity has loosened in the first half of 2019, the spot market is still well above the levels seen in 2015, 2016 and early 2017. In this current environment, a capacity crunch can truly rewrite the rules of the game – making it critical to be prepared.
Below are key insights about how shippers can plan for potential capacity challenges and optimize that plan through analytics, feedback and consistent updates.
Game Plan and Continually Update Your Playbook
One key way shippers can stay ahead of obstacles in their supply chain is using Lean Six Sigma’s PDCA (Plan, Do, Check, Act) model. The goal is to forecast and simplify your operations as much as possible to create a plan, and then as that plan is enacted, look for successful, repeatable elements that you can build out to adjust moving forward. So, when industry challenges arise you can continuously improve in how you adapt and respond.
In particular, forecasting is imperative for setting shippers up for success. Create a playbook for what will happen within your network during any disruption or seasonal event. Make sure you understand the unique seasonality, surges and holiday schedule of your organization and supply chain. Re-evaluate these as often as possible and update your plan accordingly – this is where the right data and predictive analytics can be absolutely invaluable.
Your Plan Matters to Carriers Too
Your playbook is valuable for planning with your carriers as well. If you come to the table with your playbook and help carriers to better understand your business, they too will become invested in your operations. This allows both parties to plan appropriately and flex when the capacity market shifts.
In the retail industry, in particular, it’s also important to focus on smoothing volume. For example, you don’t want 80% of your 300-mile runs picking up on Friday and delivering on Monday – that’s not carrier-friendly. Make sure you consider network optimization from all sides of your operations, including that of your carrier partners.
Bid Early, Bid Often
An industry best practice is to bid annually – and these annual resets will give your business the best results possible because much can change over the course of 12 months. While there are different bid strategies to choose from, it’s a good idea to stay hand-in-hand with carriers and bid strategically based on the current market landscape.
Shippers (or their 3PL partners) may have a core carrier base that manages up to 60-80% of their freight. It’s critical to protect these carriers and communicate with them first as part of a mutual partnership. This is a great way to maintain continued support from your incumbents and keep your bids as close to your cost-out goals as possible.
Collaborate and Leverage Big Data
In order to reach true network optimization, shippers need to utilize the right analytics and business intelligence, and there are a few key metrics that help paint an overall picture. For example, are your carriers accepting and picking up loads (primary tender acceptance/routing guide compliance) that they bid and committed to? Forecast accuracy is also a big aspect of post-bid compliance. Are you shipping what you said you were going to ship, or are you shipping more/less?
It’s also important to consider the cadence of providing feedback. Ensure that you’re regularly communicating with carriers about the outputs of your scorecarding – this helps to instill confidence that you know what’s going on with your market.
In addition, partnering with the right 3PL provider who has deep expertise in your core markets can also give you the industry edge your business needs to succeed as well as glean deeper insights from operational and market data and leverage it to further optimize your transportation strategies.