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!

https://www.youtube-nocookie.com/embed/YI0v039rAqM&feature=youtu.be

How are you planning for the next capacity crunch?

The post Preparing Your Supply Chain for Capacity Challenges appeared first on Uber Freight.

Within the last few years, less-than-truckload (LTL) rates and capacity have fluctuated. Many carriers have shifted from the traditional National Motor Freight Classification (NMFC) rate-setting formula to density-based pricing, which prices freight according to the amount of space the shipment uses in the truck. This new pricing model, along with other recent industry trends, has had a significant impact on shippers – making it important to understand the new pricing methods for LTL shipments, what’s currently happening in the LTL industry, and some of its key market challenges.

Current LTL Pricing Methods

According to The National Freight Traffic Association, the NMFC is a “standard that provides a comparison of commodities moving in interstate, intrastate and foreign commerce, similar in concept to the groupings or grading systems that serve many other industries.” Using this model, commodities are grouped into 18 freight classes—from a low of class 50 to a high of class 500—based on an evaluation of these characteristics:

• Density
• Handling
• Stowability
• Liability

More recently, the LTL industry has incorporated density-based pricing, which considers the actual weight of a particular item, classifies it and determines how much volume it will take up in a trailer. The first step many carriers have taken is introducing “Dimensioners” into their network to efficiently capture the density of each shipment as it travels through their network. This helps the carrier better understand the actual cost incurred for each shipment in order to more accurately price each account.  This method is comparable to how large parcel shipping companies such as UPS and FedEx determine their costs to ship products.

Challenges within the LTL Market

So, what does this mean for shippers? With more and more carriers adopting density-based pricing, new challenges have appeared for shippers who have lightweight shipments or bulky items that take up a lot of trailer space. And with the new pricing model, LTL carriers are requiring shippers to pay additional fees and are increasing the pressure to accurately measure shipments.

Some other challenges currently being faced by shippers in the LTL market include:

• The LTL industry is trending overall toward more frequent, smaller volume shipments. This is exacerbated by the “Amazon Effect”, as there is a greater number of smaller volume packages—instead of fewer bulkier packages—that are expected to be shipped within one or two days.
• Capacity has tightened significantly since May of 2017 across all equipment types. And with more frequent deliveries with more volume, many LTL carriers are having trouble covering all of these shipments.
• Recent natural disasters have made these LTL market challenges all the more difficult for shippers to overcome. Hurricanes Harvey and Irma as well as earthquakes in Mexico have caused additional delays in shipments and pulled further capacity out of the network.

One industry that is seeing the brunt of many of these LTL shipping challenges is the chemical space. During the winter months (November to May)—especially in the Midwest—many customers ship water-based products that freeze at 32 degrees. And as it currently stands, the LTL reefer market is very saturated, and with capacity already more limited, these chemical shipments have had trouble being filled.

LTL Shipping Solutions

One potential solution for LTL shipments is to co-load with other shippers, as consolidating in a multi-shipment environment can truly bring a number of benefits in this particular market. Uber Freight’s OptiPro program provides an optimization opportunity for shippers with under-utilized capacity through a multi-faceted collaboration network. Through this collaborative approach, multiple customers who are shipping products to the same region can build dynamic multi-stop truckloads. And a great shipper match results in:

• Transportation cost savings
• Reduced working capital
• Inventory improvement
• Greater order fill rates
• More frequent deliveries
• Increased flexibility to support customers

Collaboration has long been a focus in the transportation industry, but its realization has been a challenge because of the manual processes and lack of scalability. Uber Freight continues to strive toward creating an environment in which we are looking load by load across our whole customer network to see exactly where and how we can save our customers time, capacity time and money.

To learn more about Uber Freight’s OptiPro program with Managed Transportation, connect with an expert.  To learn more about Uber Freight’s Shipper Platform LTL freight shipping services capabilities, connect with a LTL sale team at ltl-sales@uber.com or sign up today for an instant LTL quote.

Check out Uber Freight’s density calculator to calculate freight density, estimate NMFC freight class, and optimize LTL shipping costs.

The post LTL Trends and Challenges: Density-Based Pricing appeared first on Uber Freight.