Article written by: Mark Kunar, EVP, Strategy, Transportation and Automotive, Engineering & Manufacturing, Chemical & Energy, DHL Supply Chain, North America
It was hard to escape the economic realities of the transportation capacity crunch in 2018. DAT Solutions, which tracks trucking industry data, reported a 31 percent increase in the national average spot rate for freight trucking in February 2018 compared to February 2017.
Few shippers anticipated that sharp of an increase, which stretched budgets to the breaking point and negatively impacted 2018 financial results across a number of industries.
Despite increased pricing stability this year, shippers continue to struggle with securing reliable capacity. Incremental process changes and renegotiations with carriers are simply insufficient to deal with the magnitude of the current situation.
Instead, what is often required is a fundamental change in how transportation is managed. That is best accomplished by partnering with a third-party logistics provider (3PL) that combines deep transportation expertise and a range of solutions to unlock hidden capacity, provide advance visibility into market changes and ensure competitive pricing. This starts with taking a fresh look at network design.
If you’re not getting some level of network design services as part of a transportation solution, your ability to fully utilize available capacity is limited. Working with a 3PL in the role of lead logistics partner (LLP), which includes network design and procurement, enables the move from a transactional to a strategic approach to transportation and can have a significant impact on available capacity.
DHL Supply Chain, for example, has a team of design specialists that focus exclusively on reducing overall capacity requirements by optimizing routes, reducing less-than-truckload (LTL) shipments and increasing opportunities for backhaul. And, this isn’t a one-time event. The network must be continually re-evaluated and re-engineered.
Technology tools play an important role in this process but are only as effective as the engineer using them. In-house engineers who engage with the technology infrequently will struggle to get the most out of these systems compared to engineers who work with it every day and fully understand their capabilities and limitations.
Working as an LLP, your transportation partner should also deliver value in procurement based on the visibility into carrier and freight markets that comes with engaging with carriers across all modes on a daily basis.
For this relationship to be effective, the 3PL must take a vendor-neutral approach to carrier selection rather than prioritizing its own assets. Having an LLP conduct a carrier bid with its own assets competing against other carriers can create a perception of bias and thereby limit the serious participation of critical carriers in the bid event.
With advancements in digitalization, the ROI for transportation management systems has enabled small- and mid-sized shippers to see significantly reduced payback periods. 3PLs working on behalf of these shippers are in the best position to unlock this potential as they are able to leverage their implementation experience, human capital and market awareness to reduce the risk inherent in any business transformation.
Working with a 3PL as your transportation partner can provide advance visibility into market changes while enhancing your ability to evaluate and source alternatives through the combination of deep knowledge of the carrier market, freight brokerage services, where appropriate, and dedicated fleet solutions. Be sure your partner is fully leveraging digital freight brokerage platforms as they will play a growing role in the future transportation landscape.
You’ll also want to ensure your transportation partner has capabilities that match your requirements. For example, not all have the expertise, relationships and processes to efficiently handle international shipments. By contrast, DHL Supply Chain manages both domestic and international shipments through global control towers that use consistent processes and technology to maximize capacity and manage spend.
Dedicated fleet services can be valuable for servicing the most demanding customers and meeting capacity requirements, especially on consistent lanes. An added benefit of securing capacity through dedicated fleets is that shippers lock in cost over a period, eliminating the spikes of the open market.
Providing an effective dedicated fleet solution in today’s market requires a mature and competitive approach to driver recruitment and retention. Ask about the stability of the workforce and the availability of drivers willing to perform special services such as unloading.
As with the other services mentioned, continual evaluation and re-engineering is essential to maximize capacity within the fleet. Strategies like daily dynamic routing, driver utilization during non-peak periods and route optimization all contribute to greater productivity of a dedicated fleet.
Cost-effectively securing capacity in today’s tight market requires a holistic approach that enables continual re-engineering and optimization while delivering visibility into the market and freight spend in North America and globally. When LLP and control tower services are augmented with freight brokerage and dedicated fleet solutions, shippers can more consistently meet their capacity requirements while minimizing the impact of rising rates.
For more information on DHL Transport Solutions and how we think beyond today’s shipment for our customers visit: http://app.supplychain.dhl.com/e/er?s=1897772577&lid=4411.