Last Tuesday, the Council of Supply Chain Management Professionals (CSCMP) released their 35th "CSCMP's Annual State of Logistics Report" written by Kearney and funded by Penske. We'd strongly recommend that you get a copy and read this very important report. You can go to CSCMP.org and buy a copy of the report, or you can join CSCMP for $299 and get a copy for free. It's a no brainer as it is virtually available at no cost to CSCMP members.
This week, we are examining what this means to you. The title of the report, "The Great Reset" highlights the impact of cyclicality in the transportation sector. In 2021 and 2022, carriers sought and got aggressive rate increases. In 2023, and now continuing on in to 2024, the tables have turned. Shippers are seeking and getting rate concessions from carriers who are dealing with a historical freight recession.
But this raises another issue. Over the past three years, LTL and TL carriers have experienced significant increases in their operating costs. Higher rates allowed them to cover those higher operating costs. With an extremely soft truckload market, and the corresponding reduction in rates, there are many truckload carriers – especially the independent owner-operators – who are struggling to make money.
Eventually, one of two things will happen. First, either the demand will recover and carriers will once again be able to seek and get the rates they need to be profitable. Or second, shippers will see an increasing number of carrier bankruptcies or truckload carriers voluntarily shutting down their operations. This will reduce capacity and eventually allow the remaining carriers to seek and get rate increases. This is what happened in the LTL market when Yellow shut down in August, 2023. Almost overnight, LTL carriers were able to pass through the type of rate increase they had wanted, but couldn't get because of excess capacity.
The report also highlights some other important issues for shippers. First, there will be higher levels of uncertainty in managing supply chains. So if shippers want to be proactive in managing this uncertainty, then they need to be more engaged in understanding how market trends and potential “black swan” events will affect their companies.
Second, the report addressed how the shippers, carriers, and 3PLs are using technology to implement the best possible solutions for their respective customers. The report notes:
“U.S. supply chains pressured by global economic volatility - including inflation, climate change and geopolitical conflicts - are enhancing their capabilities by investing in supply chain technologies to accelerate resilience, agility and flexibility to navigate current and future disruption.”
This raises an interesting question: How is your company using technology to build and improve your supply chain capabilities? While not explicitly stated, the report points out that enabling technology is a key issue you need to be evaluating in order to remain competitive in the future.
Having read that, it underscores the importance of a question we raised in a recent Two Minute Warning: With this uncertainty swirling around – is your supply chain an asset or a liability to your company?
How can you create a supply chain that’s an asset for your company?
One way to start is to examine and evaluate the recommendations in the report from CSCMP. This allows you to examine industry trends and establish a planning process that allows you to be proactive. If you don’t do that and you’re reactive instead, there’s a good chance your costs are going to rise.
In addition, you need to have a wholistic view of your supply chain. This involves understanding how the carriers view your supply chain, how the 3PLs can help manage your supply chain, and the initiatives you need to take to optimize your supply chain and protect yourself from change and risk.
We are finalizing the details for a webcast with CSCMP to further explore the important issues addressed in this report. As experts at anticipating supply chain change and risk, TranzAct has a great track record for helping companies be proactive in managing their supply chains. For over 40 years, we have been watching, analyzing, and accurately predicting supply chain trends, then recommending necessary remedial actions and enabling technologies.
Contact us here at TranzAct to learn about how our Supply Chain Rapid Assessment can help you implement the recommendations from CSCMP’s report so you can lower your costs and improve profitability.
If you’re interested in learning more, simply give me a call at 630-530-6190, send me an email, or schedule a meeting with me via Calendly.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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