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Dynamic contracts shield shippers from spot-market volatility during hurricane season

Dynamic contracts shield shippers from spot-market volatility during hurricane season (Photo: Jim Allen/FreightWaves)

The annual hurricane season requires tremendous scheduling and operational planning within the logistics industry, as the resulting storms often cause major flooding and road closures. Although carriers would seem to be the obvious logistics stakeholders impacted the most during this season, shippers can be worse off as they cannot plan for the capacity volatility that could affect their supply chains. 

FreightWaves spoke with Anshu Prasad, the CEO of Leaf Logistics, to understand how shippers could leverage technology to revamp their transportation planning to react better to volatility.

“Shippers know hurricanes will happen, but they don’t know when or how this will impact their supply chains. This makes it difficult to plan ahead of time with the traditional request for proposal (RFP), and they’re often left scrambling on the spot market to get coverage,” said Prasad. “Capacity also becomes an issue during hurricanes, which drives up spot prices when a shipper is just trying to get a load off the dock to their customer. With the added unpredictability of the pandemic, costs are going to be driven up in many markets as well.”

Prasad suggested that shippers would do well to add a flexible layer of dynamic contracts, which are shorter in duration and can respond to sudden market shifts and changing business needs. To bridge the technology gap, Leaf Logistics introduced Flex Dedicated contracts that give shippers the agility to react to market changes without needing to rely on the spot market’s whims. 

In general, shippers understand that contracts cannot be honored every time — even during a typical season, let alone during inclement weather. Though this leads shippers to create robust backup plans, they still cannot accurately factor in the impact of hurricanes on operations and their ability to honor contracts. 

“At Leaf, we focus our analytics on enhancing predictability, understanding what volumes and capacity must be honored to keep the supply chain running. By locking down some of this capacity, we let our customers focus on other parts of their supply chains that need their attention — and there’s often lots to do during hurricanes or wildfires,” said Prasad. 

Leaf’s data platform shows shippers the optimum freight mix that can be allocated to dynamic contracts, allowing them to respond to hurricanes with agility. This way, shippers continue to exert control over costs and have a reliable capacity to provide a great delivery experience to their end customers. 

Prasad contended that though the industry has moved forward in terms of efficiency and automation, it still fails to address the underlying brittleness of the processes themselves. “We’ve rethought the approach. Our platform analyzes all of a shipper’s data to show them where there is an opportunity to add a flexible layer of dynamic contracts,” he said. This ensures that shippers can respond to rapidly evolving market conditions, while also locking in some predictability into their planning. 

For instance, when a hurricane hits, shippers can proactively identify potential surges across a portion of their network, prompting them to lock in an eight-week contract to get through the hurricane and the uncertainty of the spot market as its aftermath. 

Before technology incursion, the industry worked via phone calls and emails, which was the alternative available to shippers to identify rates and secure capacity during the hurricane season, when RFPs and backup routing guides fail them. 

“But timing the market or a hurricane never works. Our tools reduce the man-hours needed to put these plans and schedules in place, but dealing with unpredictable rates and capacity requires a networkwide view of options to fix problems as they occur,” said Prasad. “The expanding Leaf network is a way to coordinate across shippers and carriers to manage through the inevitable surprises hurricanes and other unpredictable events create.”


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