The state of freight traffic has been a major talking point in corporate boardrooms as congestion at ports, marshalling yards and inland distribution centers have disrupted U.S. supply chains over the past two years.
While there are signs that congestion is beginning to ease, transport capacity across borders is strained and no policy action can correct the imbalance. Businesses need to accept the situation and find ways to minimize its impact.
As a result, shippers are taking a fresh look at modes of transportation they may have rejected in the past. For example, expedited shipping services, once relegated to emergencies, are now a commonplace part of the transportation mix.
Port congestion and a shortage of containers, for example, are driving demand for air freight as companies migrate from sea to air to meet market demand across regions. Air freight is usually 12 to 16 times more expensive than ocean transportation, but the gap has narrowed as ocean carriers increased their rates in response to increased consumer demand as a result of the pandemic. The growth of air freight has even prompted shipping companies to buy planes to help customers ship cargo around the world, showing that flying cargo may not just be a short-term trend. The fact that ocean freight rates are now declining only underscores the unpredictability of the freight market and the need for shippers to adopt an agile, multi-modal approach.
Switching to air freight represents a philosophical transition. In a world of free two-day shipping, everything is time sensitive. This means that accelerated services need to be built into inventory management models. Customers are more likely to use a carrier who is fast, responsive and delivers on time. For customers, value comes from experience, consumption and use.
By building more effective and streamlined shipping and delivery systems, you can also enjoy expedited services on the go. These have traditionally been handled as dedicated truckload shipments. But that’s inefficient because express loads often don’t fill an entire trailer and could fit into smaller vehicles like Sprinter vans, vans, panel vans and even trucks. However, the traditional accelerated small vehicle market comes with its own set of challenges. Until recently, it was highly fragmented, meaning truckers found it difficult to find and book the vehicles they needed when they needed them. Historically, the small car acceleration market has served very time-sensitive industries such as automotive manufacturing, and the tariffs associated with this mode reflect the premium nature of the service offered.
Due to the higher costs, traditional expedited freight transport was mainly used for shipments over shorter distances. Today’s accelerated small vehicle networks use technology to defragment the market, create competition and thereby reduce costs, enabling shippers to use this mode for local, regional or even cross-border shipping needs like never before. Expedited shipping of small vehicles also minimizes the risk of frequent loading and unloading, damage, theft and mishandling when using other modes of transportation, such as. B. conventional LTL.
Today’s supply chain management is all about risk reduction. More than two years of pandemic-related disruptions have forced companies to overhaul their supply chains to make them more resilient. A McKinsey survey of supply chain leaders found that almost all (92%) had improved their resilience through physical changes to their supply chain footprints. These changes include increasing inventory of critical products, dual sourcing of raw materials, and increasing inventory along the supply chain.
Increasing inventories have led to an increase in storage space costs. To offset higher storage costs or when storage capacity is simply not available in suitable locations, some shippers have resorted to storing cargo in containers. The practice has exacerbated the lack of transportation that has plagued supply chains during the pandemic.
Many retailers who have stocked up in response to pandemic-driven consumer demand are now finding that not only may they be stocking too much inventory, but their inventory may not be positioned where it’s needed. Repositioning this inventory presents another challenge that small vehicle logistics can handle cost-effectively and efficiently.
The situation further highlights the fragility of logistics networks and the need to increase capacity. Of course, customers should also recognize that building resiliency can impact efficiency and ultimately increase costs.
In this dynamic environment, shippers must adjust their beliefs and expectations to reflect current realities in the supply chain. The transport capacity crisis is not going to go away anytime soon, and you need to plan accordingly.
Everyone is in the same predicament of backorders, late shipments and higher costs. Still, customers have, and still have, a strong desire for reliability willing to pay more for a better customer experience. On-time delivery is one of the most important criteria that customers use to judge their experience. Today’s expedited shipping of small vehicles offers shippers faster delivery and more agility, which can be a competitive advantage in today’s challenging market.
Alex Winston is President of Accelerate everyone.
