Shipping and transportation costs will continue to be major expenditures for companies that need to carefully manage their supply chain operations in 2013. This article explores transportation management trends, as well as opportunities during these uncertain economic times. We offer insight on issues that companies of any size should closely monitor to help them control rising costs and also flag hidden shipping charges.
Economic Impact on Transportation Trends
For companies with shipping needs, the economy will clearly have an impact on the transportation industry. We’re in for modest growth at best, which means that carriers will see limited opportunities for expansion and will continue to maximize existing equipment/resources before taking on anything new. The best predictions have the Canadian economy growing in the 2 to 2.5 per cent range, with the Bank of Canada likely to hold interest rates until closer to 2014.
The U.S. will see slow expansion, while the European Union will struggle for some time. Worldwide, slower growth will result in fewer exports, lower trans-border traffic, less domestic job creation and therefore, lower consumer spending. All this means fewer shipments to move.
Rising Rates and Fuel Costs
North American businesses that ship goods should not expect any break on freight rates and fuel costs this year. Despite general rate increases, carriers have not fully recovered from the downturn of 2008. Some increases may have been understated with charges hidden in fuel surcharges and other fees. Few carriers have been able to get their rates back to the levels they enjoyed prior to the recession; in response, they are finding creative ways to hide the increases. Take note that some carriers have included new fees or “blended” charges, such as a portion of the fuel surcharge, into regular rates.
Fuel costs will remain volatile as always, despite new developments in the controversial practice of hydraulic fracturing or “fracking” (the process of pumping liquids into a shale rock formation to force oil and gases to the surface) in the U.S. While there may be a lot more reserve available than previously thought, it still comes at a high development and extraction cost. Don’t expect a decline in fuel prices any time soon.
Options for Managing the Supply Chain
Whether shipping consumer or business-to-business products, companies can take advantage of trends that are changing the scope of the supply chain. Shippers should explore options that include relationship management, dedicated transportation, freight management and technology.
The trend toward building better relationships between companies and their carriers is one to watch for in 2013 and beyond. Relationship management can lead to reducing the need to continually issuing requests for proposals, simply to secure the lowest rate possible. With the high cost of switching transport companies simply to get lower rates – which are often short-term and marginal at best – shippers and carriers would do better to hold face-to-face discussions to establish a mode that reflects the conditions of the business and the services to be provided.
A relationship management approach can replace RFPs, which have led to much discord between shippers and carriers, often because the end result was lose-lose. RFPs also failed to recognize the value of long-term relationships that carriers and shippers had developed over years of working together.
Dedicated Transportation for Better Control
With the combination of aging fleets, driver availability, demographics and fluctuating rates, shippers have the option of taking advantage of another trend: choosing to enter into an agreement with a dedicated carrier for inbound and outbound shipments. Using a dedicated carrier is clearly an option for companies to better manage their transportation costs and services, while reducing risk.
Freight Management: An Alternative to Brokers
As supply chains are becoming more sophisticated, it is no longer enough to source shipments using only brokers. Brokers have performed a valuable function by finding available carriers at low rates. However, a freight management system offers full integration between shippers and carriers. An alternative to a broker is a freight management provider who can provide a wider variety of highly-qualified carriers. This will result in fewer disruptions in service and more flexibility.
A freight management provider could do a much better job of moving goods for many organizations. This individual has the experience, the connections with multiple carriers and current knowledge of the opportunities in the industry.
Technology and Online Shopping Trends
Online shopping increased so much last year that companies are scrambling to find ways to make the transactions as easy as possible. What does this mean for companies in the business-to-consumer market? Consumers clearly want the convenience of online shopping and retailers are offering alternative methods of delivery to offer the highest levels of service at reasonable costs. The most successful carriers will be those who use innovative ways to consolidate shipments for their business customers and vary methods of delivery.
Software developers are bringing on new applications that allow carriers to replace bulky equipment with smart devices that improve information and flexibility in services. Carriers that have caught on to these innovations can use technology to improve communication with drivers and customers.
Transportation Assessment: Keep Pace with the Trends
Just like fuel charges, the cost of shipping goods – whether local, national or international – will likely increase this year. It is essential to consider these transportation trends and be aware of the pressures that both shippers and carriers face in moving goods. Companies also have to be mindful of hidden charges that range from administration fees and fuel surcharges to specialty services – all unnecessarily adding to a shipping company’s costs.
What businesses don’t know about shipping and carrier practices could hurt them financially. For companies that would like more insight on these trends, as well as more information on managing the logistics and costs of their shipping needs, a transportation assessment is in order. Supply Chain Systems Ltd. offers a complimentary assessment and will walk companies through the complicated maze of supply chain issues.
For more information, please contact –
Bill Simpson, President
Supply Chain Systems Ltd.