How do we manage freight costs in this Code Red environment?

Sep 16, 2020

WOW! It appears that our declaration of “CODE RED” in the transportation sector was spot on!

I’ve heard from several shippers who have confirmed that it’s an extremely challenging environment in the transportation sector. Go ahead and pick your mode. Whether it’s ocean, LTL, truckload, parcel, or now, intermodal, capacity and rising rates are an issue. And when you read a recent article in the American Journal of Transportation highlighting the fact that a shipper couldn’t book freight on the BNSF or the UP, container rates are stratospheric, and it’s the most challenging environment in thirty years, it raises concerns about how freight will get moved in the fourth quarter.

As one person recently told me: Nobody expected the needle to move this far in favor of carriers this year. Based on the unpredictability we've seen so far, they’re also wondering: What can we do to manage through this current challenging environment?

When I get the “What can I do?” question, I encourage shippers to ask the following three things:

Does our company have a clear, written transportation spend management plan?

This plan should highlight the process and strategies your company uses to control freight costs. Unfortunately, far too many companies answer that question with “No!”. They have written plans for a bunch of other things--but for whatever reason, when it comes to transportation, many companies don’t have a written plan. In essence they are winging it! If your company is in this category, TranzAct can give you some help and support in drafting this plan. It would be a great first step for managing through the rest of the year and on into 2021, plus help you to see the big picture. If you haven't downloaded it already, our Transportation Spend Management eBook can help you get started with creating a plan like this.

Do we have accurate data that helps us understand the correlation between our sales, procurement, and operations areas and how we incur freight costs?

Having accurate data is the key to actually reducing freight costs because this data can help assess how changes potentially could impact your service or profitability levels. It is also important to note that one blind spot companies often have is tracking and managing their inbound freight costs. And almost all companies are challenged by communicating the right data to the right department at the right time. Take some time to outline the information you need, how to find it, and who it needs to be shared with.

Are we taking advantage of the resources and information that’s out there? And do I have the right tools to have visibility to the issues I need to understand?

I have some great news! There is all sorts of great information out there that can help you manage your freight costs. For example, with capacity once again being a big issue, being a “Shipper of Choice” is important. One great resource that will help you understand how to become a Shipper of Choice is our interview with Dave Venberg, who at the time was the Director of Transportation and Logistics at Ardent Mills. Dave had several great tips for becoming a Shipper of Choice.

He covers a lot of aspects of this feat during the interview, including:

  • How Ardent Mills Became a Shipper of Choice
  • How and Why Ardent Mills Conducted a Massive Driver Survey
  • C-Suite Transportation Support
  • Sharing Data to Improve Your Customers' Docks
  • Setting Priorities that Help Everyone Win

Right now shippers could use any advantage they can get with carriers, and his insights could help you discover a way for your company to get ahead.

This is one of many interviews and resources we have to help shippers, and you can find more in our Resource Center.