The 2:00 Minute Warning

In 1989, a consultant named Sidney Yoshida conducted an important study that came to be known as the Iceberg of Ignorance study. It concluded that 100% of frontline workers were aware of problems that the company was having but as you moved up the associate ladder, that percentage declined dramatically. While "frontline workers were aware of 100% of the floor problems faced by an organization, supervisors were aware of only 74%, middle managers were aware of only 9%, and senior executives were aware of only 4% of the problems” frontline workers saw every day.

Where are we going with this? The "Iceberg of Ignorance" is affecting a lot of corporate supply chains!

Over the past few months, we’ve been focusing on those headline making events that were “above the waterline” and very visible. We watched anxiously as the railroads and UPS weathered contentious negotiations that brought them to the brink of a strike. We saw shippers diverting their ocean freight to the East Coast because of the prolonged labor negotiations at the West Coast Ports. And then Yellow announced it was closing their doors. It has been an eventful 2023!

But I have an important question for you: What about the things that are below the waterline and are not readily visible as shippers sail the supply chain seas? Believe it or not, there are all sorts of things going on – and these things could potentially impact your supply chains and freight costs.
 
What kinds of things are we referring to? Depending on your shipping patterns there are a couple of things that you may want to have on your radar screen.

Right now, Panama is in the midst of a drought that has resulted in delays as vessels have to offload cargo to address draft issues caused by low water levels in the Panama Canal. This drought has caused temporary restrictions that are being exacerbated by their timing. During the fourth quarter, the canal typically experiences greater volumes and delays. And since experts are predicting that these delays may stretch well into 2024, shippers may see lengthier delays in east bound freight headed for the East Coast and Southeast Ports.
 
Another item to watch is the rising cost of diesel fuel. Retail diesel prices fell overall for roughly a year after peaking at a record high of $5.81 in June 2022, but have been on the rise again since July. This is coming at a time when trucking capacity is still high relative to demand, pushing rates downwards. And with the announcement by the Saudis that they will enforce further production cuts through the end of 2023, we could see diesel prices and fuel surcharges continue to escalate.
 
And there are other “below the waterline issues" as well. Who knows what will happen with the Yellow terminals? There has been speculation that another LTL carrier may buy the terminals (and approximately 11,700 doors) and let them sit idle in order to keep competitors out of the markets. And who knows how many trucking companies will close their doors if the current freight recession doesn’t end relatively soon.
 
Add it all up and it's obvious: There are plenty of other issues “below the waterline.” And that is why in planning for the future, it’s important to have great data that will provide insights in to your company’s past shipping history and costs and also guide you in assessing cost saving options. At TranzAct, we have proven that a great freight audit and payment system is a key component for having the right data to plan for the future. So if you’re looking to put great data to work for you, we’ve prioritized building an outstanding system with this thought in mind. If you’re looking for new options in this area, we encourage you to get in touch.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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