This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
Developing strategies for 2020 on transportation procurement and carrier relations related to intermodal container drayage are priorities for supply chain executives as they end an “anything but ordinary” 2019.
Predicting industry trends has become nearly impossible in this new world of unpredictable trade policy that continues to rewrite trade patterns, cargo flows, and pressures industries to adapt to the erratic impact of tariffs. Neither a short-term nor long-term approach is right or wrong. Both present risks and opportunities.
Shippers adapting to play the short-term game in 2020 are looking to take advantage of a favorable spot market, implement blind RFPs, and expand their carrier bases. By implementing scalable processes, achieving more consistent volumes, and providing ample lead time, their switching costs would become relatively low. Although these efforts can be fruitful in reducing cost, it could be at the expense of valuable customer service. In contrast, as the industry continues to struggle with added complexities, volatility in flow, and inefficiencies in chassis models, more shippers across all industries should move towards a longer-term strategy. Partnership and consistency in drayage carrier relationships are a necessity to implement opportunities for improvement.
Dedicated drayage and chassis models under multiyear agreements, with mutually agreed upon KPIs, are becoming more the norm. Savvy shippers are locking up partners and capacity to weather the storm of uncertainty. Together, parties are sharing information through technology and improving mutually beneficial processes. Opportunities abound in reducing often overlooked expenses, such as bobtails, chassis splits, per diem, and daily chassis usage fees.
Whether you decide on a long-term, short-term, or blended approach in 2020, a sound strategy that fits your business model and best addresses your customer needs is always a worthwhile supply chain investment.