Prepare Your Supply Chain to Overcome Capacity Challenges

capacityIncreased demand and customer expectations continue to put pressure on shippers to deliver on-time-and-in-full without comprising their bottom line. This was especially difficult in 2018 as capacity constraints caused freight rates to skyrocket.

While conditions have certainly improved over the last year, no one knows when the market will shift again. And with the number of factors that could affect capacity in the short-term and long-term, including legislation, the driver shortage, supplier requirements from large retailers, seasonal and promotional surges and more, it’s important for shippers to be prepared. This requires having a strategic plan that is continuously refined and optimized.

Continually Update Your Playbook

To effectively stay ahead of supply chain obstacles, shippers should consider using a proven methodology to guide their approach to planning and ongoing improvement. For example, Lean Six Sigma’s PDCA (Plan, Do, Check, Act) model helps shippers create a plan and then identify successful elements that can be repeated and adjusted moving forward. This positions shippers (and their logistics providers) to be prepared to adapt and respond when challenges arise.

This approach helps shippers to better forecast demand and create a playbook for what will happen within their network during any disruption or seasonal event. Shippers must understand the impact holidays, seasonality and surges have on their supply chain and how they need to adapt. It’s also important to continuously re-evaluate these events and update their plan accordingly.

Share Your Plan with Carriers

A playbook is also valuable when it comes to planning with carriers, as it helps them better understand the shipper’s business and unique needs. It’s important to lay out any seasonality, limited time offers or end of month/quarter information. This allows both parties to plan appropriately and flex when the capacity market shifts. This approach also helps foster a strong, collaborative relationship where both sides are invested.

Using the playbook for carrier planning will also help with smoothing volume, which is especially important in the retail industry. It also helps shippers ensure they are implementing carrier-friendly practices and communicating that information to carriers, such as drop/hook capabilities on the shipper/receiver end along with efficient/desirable delivery appointments.

Bid Often to Adapt to Market Changes

While there are different bid strategies, it’s important for shippers to bid based on the current market landscape. Bidding annually allows shippers to essentially “reset” and adjust to market changes, which can be significant as a lot can happen over the course of the 12 months.

It’s also important for shippers to use the bidding process to strengthen relationships with core carriers. Shippers (or their 3PL partners) may have a core carrier base that manages up to 60-80% of their freight, so it’s important to protect these relationships and communicate with them first. This is a great way to maintain continued incumbent support and keep bids as close to cost-out goals as possible.

Collaborate and Leverage Data

To truly optimize their network and achieve optimal results, shippers need to utilize the right analytics and business intelligence. For example:

  • Are your carriers accepting and picking up loads (primary tender acceptance/routing guide compliance) that they bid on and committed to?
  • Are you providing ample lead time and is your freight available when you say it should be available?
  • Are you shipping what you said you were going to ship, or are you shipping more/less?
  • Are you efficient with your loading capabilities – limiting turn time and showing carriers you are committed to their own operational efficiencies?
  • How is your carrier’s service to customers’ expected dates in addition to the appointment the receiver gave?

It’s also important to consider the cadence of providing feedback. Regularly communicating with carriers about the outputs of the scorecards helps improve transparency and instill confidence that the shipper knows what’s going on in the market.

In addition, partnering with a logistics provider with expertise in your core markets can help glean deeper insights from operational and market data and use it to further improve your transportation strategies and achieve greater results.

Take a Forward-Thinking Approach to Capacity

Even with the market becoming more stable, capacity will eventually tighten. Shippers should continue to focus on optimization initiatives and support their core carrier relationships. This will have a positive impact when market conditions are good, while at the same time preparing them for a time when capacity starts to tighten.

Darren Miesner currently serves as vice president of operations for Transplace. He joined Transplace in August 2000 and has had several roles within operations including front-line support, logistics supervisor, operations manager, general manager and director of operations. Mr. Miesner has managed many Fortune 500 clients and industry verticals during his 18 year operationally focused tenure that include manufacturing, retail, quick serve, and CPG. Mr. Miesner completed a Lean Six Sigma Green Belt Course through the University of Texas at Arlington in August of 2005 and received his Lean Six Sigma Green Belt certification from Transplace in May of 2006. He received a Bachelor of Arts in Mathematics from the University of Arkansas.  

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