Preparing Your Supply Chain for Capacity Challenges
By Darren Miesner, Vice President of Operations, Transplace
It’s a fascinating time in the logistics industry. Increased demand and customer expectations are putting intense pressure on shippers to deliver on-time-and-in-full without blowing 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 even early 2017. In this current environment, a capacity crunch can truly rewrite the rules of the game—making it critical to be prepared in advance.
I recently had the opportunity to discuss how to prepare your supply chain for capacity challenges with Adrian Gonzalez on an episode of Talking Logistics. Below are some of the key insights shared during our conversation about how shippers can plan for ongoing capacity challenges and optimize that plan through analytics, feedback and consistent updates.
Build Out (And Constantly Update) Your Playbook
At Transplace, Lean Six Sigma’s PDCA (Plan, Do, Check, Act) model is ingrained within our DNA—and shippers can use this same method to keep ahead of obstacles in their own supply chain operations. The key 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. So, when the next hurricane or polar vortex throws your supply chain out of balance, you can continuously improve in how you adapt and respond.
In particular, forecasting is absolutely instrumental in setting shippers up for success. You need to spend the necessary time to 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.
Why Your Plan Matters to Carriers
When it comes to planning with your carriers, if you come to the table with your playbook and help them 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 fluctuates.
In the retail market 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 certainly not carrier-friendly. Make sure you consider network optimization from all sides of your operations, including that of your carrier partners.
Developing Your Bid Strategy: Bid Early, Bid Often
At Transplace, we bid annually—and these annual resets give us the best results possible because so much can change over the course of the year. While there are many different strategies to choose from, our approach is to stay hand-in-hand with carriers and bid strategically annually based on the current market landscape.
Shippers (or their 3PL partners) may have a core carrier base that may be managing up to 60-80% of their freight. It’s critical to protect these carriers and have conversations with them first as part of a mutual partnership. This is a great way to gain continued support from your incumbents and keep your bids as close to your cost-out goals as possible.
Data, Metrics and Communication
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 your carriers shipping what they said they were going to ship, or are they 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 score carding—this helps to instill confidence that you know what’s going on with your market. And partnering with the right 3PL provider who has deep expertise in your core markets can also help give you the industry edge you need to succeed.
Want to learn more? Watch the full video of my conversation with Adrian Gonzalez below!
How are you planning for the next capacity crunch?