Truckload: More volume, fewer services

When planning for a large sales volume, manufacturers now need to include transport— particularly truckload van requirements—earlier in the planning process.

Government and industry meta data analysis of 2020 indicates that, as the pandemic progressed, we all started ordering more goods—often online—as we reduced use of consumer services (restaurants, etc.) because they were closed or represented more of a hassle to visit and make use of.

The increase in goods purchased raised orders for transportation, either directly to the consumer (parcel and LTL), or to a near-to-market distribution center (truckload). However, it’s important to keep in mind that the trucking industry is a “service” as well, and it experienced a reduction in drivers and operations personnel while the business was building volume, all while working under CDC guidelines.

This squeeze has resulted in price increases and significant capacity constraints. As an example, paving stones that are often regionally produced in the southeastern United States have lead times on orders of 90 days or more, and the installers tell me that the transport to the wholesaler is a further delay of up to a week. Thus, getting a walkway redone went from two weeks or three weeks to around 120 days.

A deeper dive into the paver manufacturing process reveals that raw stone and clay requires transport equipment and skilled heavy equipment operators, all of which are currently in short supply. So, how do we adjust our planning and buying to be successful in the coming period of limited capacity and higher rates?

In managing highway transportation costs as well as service levels, the smart ones are redoing the supply chain playbook for their enterprise. Here are five actions possible when the technology enables an agile approach to planning logistics now.

1. Lead times for products—historically forecast quarterly and including assumptions of fast transport—need to be revised, particularly for imported goods. Where truckload batches were standard, the use of LTL is growing as limited production capacity and high demand result in multiple smaller shipments to fulfill large orders. With this, the cost is higher per pound and order fulfillment time is stretched.
2. Team formation for sales and operations planning (S&OP) often gave little attention to transportation and omitted inviting the transportation folks to S&OP meetings as regular delivery performance was assumed. Not anymore. Firms need to maximize advanced notice to all service providers of upcoming needs.
3. Outside help from brokers and dedicated fleet services to enhance scheduling and dispatching efforts is a common way for shippers to boost effectiveness. Cost will probably be higher, but service metrics will improve with more folks scouring the market for capacity.
4. Building the network and relationships is critical at all times, but particularly when the supply chain is under stress. For service providers, this challenging period can result in new desirable business by earning favor with target firms through performance in a pinch. Helping shippers innovate with new distribution options and expedited services can result in new, long-term relationships.
5. Analytics or business intelligence has become a top priority for most shippers that might have focused solely on the immediately adjacent customer or supplier in their daily operations. Now, smart firms are gathering data all along their supply chain to get some advanced word on demand, disruptions, re-routing and re-engineering at their more remote supply and distribution partners.

Today, visibility has taken on a whole new emphasis. Those who can provide visibility are valued, and those who can turn raw transportation data into actionable intelligence have long and rewarding careers ahead of them.