The 2:00 Minute Warning

Folks, forgive my candor and bluntness, but I have to share something with you. We've produced these Two Minute Warnings for several years and are happy that thousands of shippers regularly open them and provide gratifying complements and positive feedback about the timeliness and value of the information we share with you.

But to be very honest with you, I sometimes wonder how many shippers are following our recommendations or heeding our advice about the things they need to do to protect their supply chains. Why do I bring this up?

Over the years, we have consistently recommended that shippers need an annual written Supply Chain Management Plan that includes forecasts, identifies threats / issues which could disrupt your supply chains and highlights the investments that your company will be making to improve its supply chain capabilities. But how many companies actually have a written supply chain management plan that has been reviewed, discussed and approved by executives in the C-Suite? Does your company have such a plan?

There are things that are happening right now that underscore why it is so important to have that annual, written supply chain management plan. These things could impact your supply chains and freight costs in 2025 and beyond.

On an immediate basis, tomorrow (August 22, 2024) two of Canada’s two main railroads – Canadian Pacific Kansas City and Canadian National – may go on strike. The networks in the U.S. and Mexico will remain operational even if there is a work stoppage in Canada, but this could have a significant impact on U.S. rail operations and the truckload markets in Canada and the United States. The U.S. Department of Agriculture warns the impact would be “devastating,” and hit the flow of farm goods in the U.S. “and beyond.”

Over in the ocean markets, we are watching a couple of things. First, how will the explosion at the Chinese port of Ningbo impact exports out of China? Will the multi-day closure of the port earlier this month, amidst strong volumes, create delays in getting your shipments delivered?

Second, there is an increasing likelihood of a strike on the East and Gulf Coast ports after September 30th. For shippers who rely on deliveries to the East Coast ports, a strike of any length could be devastating. Third and finally, the flow of traffic through the Red Sea and the Suez Canal continues to be affected by the threat of attacks from the Houthi rebels.

In the LTL market, the proposed NMFC changes and the increased use of density based pricing by the LTL carriers could be game changers. Shippers who sit back and do nothing will see their LTL costs increase by 7-10% and have to deal with a new level of complexity when these changes take effect in May 2025.

In the parcel market, the rollout of peak season surcharges by FedEx and UPS will definitely impact your parcel costs. Once again, shippers who sit back and do nothing can expect to see their parcel costs increase by as much as 8-15%.

So basically, here is where you are at. Your company has two choices. You can sit back and do nothing, be surprised and “react” as you watch your company's freight costs go up. Just hope your competitors are doing the same thing and ignoring the need to invest in having a proactive supply chain that helps grow their company.

The second choice is to create a comprehensive Supply Chain Plan that defines a strategy and the resources and processes to strengthen your company’s supply chain capabilities. As I learned when I interviewed Jeff Wilke, who helped create Amazon’s superior supply chain capabilities, Amazon chose the second option so they could use their supply chain capabilities as a competitive weapon to defeat their competitors.

For those who see this Two Minute Warning as a “wake up” call and want to pursue Option 2 – a.k.a. strengthening your supply chain – I have great news. TranzAct has great resources and the expertise to partner with your company in becoming a strategic, data driven, and technology-enabled shipper. Working together your supply chain can become an asset that helps lower your costs significantly and maximize your service levels, and not an anchor.

Simply get in touch to learn more. Give us a call, send me an email or schedule a time for us to meet.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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