Nov
Same Problem, Different Causes
In 2017, there was a notable transportation capacity crisis stemming from multiple challenges facing both the transportation industry itself and the nation as a whole. For the transportation industry, there was a marked shortage of trucks to carry an abundance of loads. The cause? Fleet deterioration due to transportation companies cutting costs, a shortage in drivers with CDLs due to retirement and compensation challenges (and Millennials lacking interest in the industry), massive storms and fires causing economic problems, and increased regulations like the electronic logging device (ELD) topping a list of more than 20 laws making it difficult for companies to stay in business.
Your manufacturing and distribution clients were undoubtedly impacted during that time. They may have had difficulty getting trucks to move loads from warehouses and factories to stores or to other supply chain partners. They might have experienced significant delays in getting raw materials or other items shipped into their facilities. While the industry faces challenges today that are similar to those of 2017, another transportation capacity crisis has arisen to make life difficult for your clients: extreme growth in consumer demand and the global turn to e-commerce as a result of the pandemic.
In September, the Logistics Managers’ Index (LMI) — a survey of logistics executives — showed capacity fell another 770 basis points to a 23.8% reading, a new low point. As a diffusion index, a reading below 50% indicates contraction, and above 50% indicates expansion. For companies closest to consumers downstream, the capacity mark was even lower at 16.3%. The report noted that companies are struggling to find the transportation capacity needed to meet consumers’ growing demand for home delivery. And with the holidays upon us (traditionally when the industry experiences its peak demand), it follows that the transportation capacity crisis will only become more challenging.
How to Prepare Your Clients for Difficulty Ahead
While the transportation industry is experiencing rapid growth as a result of the pandemic and increasing consumer demand via e-commerce, capacity is expected to remain in contraction territory for some time. Prices are expected to remain high as well, with LMI survey respondents registering an 85.8% reading for the index one year from now. Perhaps of more immediate concern to your clients is tightening warehouse space and pricing as companies seek to replenish inventories from international suppliers after not being able to in late Q2.
With much to consider around the transportation crisis, now is the time for your clients to dig deep into their logistics and supply chain functions to identify opportunities to reduce costs and increase efficiencies. A greater focus here will result in increased competitiveness, as companies not giving logistics and the supply chain the attention they need will continue struggling to meet demand and meet their respective revenue goals.
Focus on Identifying and Monitoring Key Metrics
Monitoring logistics-related metrics is critical to ensuring your clients are optimizing their transportation efforts as much as possible and using that information to make informed decisions as to their next steps. What metrics are your clients tracking for their logistics and supply chain improvement efforts — if any at all? Companies often fail to give logistics the analytical support needed to understand and drive performance for bottom-line results.
There are dozens of functional and complex metrics that you and your clients should benchmark and monitor over time. These include cash-to-cash time cycle, freight bill accuracy, perfect order rate, inventory turnover, on-time shipping, inventory velocity, and more. If there is no system, process, or even capacity to monitor logistics metrics, now is the time to consider outsourcing support to a reliable third party.
How We Help: At Brady Partners, we work with trusted advisors to manufacturing and distribution clients for logistics optimization. Connect with us today for a complimentary logistics health check-up for your clients.
Build an E-Commerce Logistics Strategy
For your clients to meet the growing demand of today’s consumers and differentiate themselves, eCommerce logistics and omnichannel strategies must become a key part of their logistics function. In the U.S. alone, eCommerce grew 14.2% in 2019 — reaching nearly $520 billion and making the U.S. the third largest and most advanced eCommerce marketplace in the world. Your clients’ logistics operation needs to be positioned to provide the ultimate eCommerce customer experience. But how can this be achieved with the transportation capacity crisis expected to continue well into the foreseeable future?
The use of predictive analytics will be essential for your clients to not only satisfy customers who not only demand quality delivery but also for understanding how your clients’ businesses are performing. Predictive analytics tools will help your clients plan for future demand and requirements to establish a baseline, better manage inventory and incoming orders, spot positive trends and potential problems for orders, anticipate future workloads and estimate peak season tasks, and more effectively manage resources to support profitability.
How We Help: At Brady Partners, we’re experts in helping clients build meaningful, results-oriented eCommerce strategies that support the logistics function and numerous other areas of your business. Contact us to learn more about our capabilities.
Let’s Help Your Clients Navigate the Transportation Capacity Crisis with Confidence
While benchmarking key metrics and developing up-to-date eCommerce strategies are two ideal solutions for positioning your clients for success amid ongoing transportation capacity challenges, they are not the only ones. At Brady Partners, we work with manufacturing and distribution clients and their trusted advisors to identify new opportunities, conduct ongoing analysis of logistics performance, leverage new trends, and educate your clients on the importance and potential of logistics to improve competitive position and financial performance.
If your clients have been struggling with transportation capacity issues, now is the time to make a change for the better. Much remains to be seen in the logistics industry, but with the right tools and the right partner providing support, your clients will be able to reduce costs, achieve greater alignment, and ultimately achieve their strategic goals.
Get in touch with us to put our logistics expertise to the test.