It’s been a rough year for transportation professionals. After years of successfully beating down rates to make budgets, shippers were faced with the fastest market turnaround to a carrier (sellers) market than any of us have ever seen. While shippers may have gotten a pass this year and companies dealt with freight rates increasing as high as 20 to 30 percent, this pass won’t go on indefinitely.
Transportation professionals, reeling from blown budgets, natural disasters, regulatory issues, and major capacity issues, are still expected to keep the supply chain moving. This is a systemic vs. cyclical issue and the factors that have been affecting capacity are expected to continue into 2019, albeit at a slower rate. Shippers who maintain a “business as usual” approach can expect another 8 to 10 percent increase in their 2019 freight budgets and will have more difficulty in sourcing capacity.
Carriers are looking at their book of business differently. According to Gregg Gantt of Old Dominion Freight Lines, contribution operating ratio has been replaced by individual customer profitability. Companies that commit to become a strategic shipper will be able to get preferred treatment resulting in lower rates and access to great capacity.
So, what can transportation folks do to manage this ongoing storm? First, shippers need to become more strategic in their approach to transportation management. Do you have a written, comprehensive Transportation Spend Management Plan? This document can determine priorities, document required investments and delineate internal/external issues affecting transportation.
Second, get C-level engagement so that they view the allocation of resources to the transportation function as a critical priority. Transportation personnel should have a seat at the table and a voice to make changes in areas that directly impact transportation costs. Finally, be willing to ask for help.