The Freight Recession is Here: 6 Key Considerations
What matters most to transportation, logistics and supply chain leaders right now [according to the experts]
According to FreightWaves.com, 40% of the global economy is tied to logistics-dependent industries, and millions of logistics firms keep supply chains moving.
Essentially, when it rains in the supply chain, it pours for logistics firms.
And, with a global pandemic, the ups and downs of recent product shortages, and fluctuating oil prices, there has been no shortage of concern. The question remains: “What does all of this mean for the supply chain?” While no one can predict the future in its entirety, some trends are worth following and some changes worth considering to improve processes, lessen the economic impact, and scale through innovation.
To help you navigate these waters, we want to share six supply chain considerations our experts have been exploring:
1. Macro-Economic Impacts on Supply Chain
Instability in the geopolitical environment is causing companies to re-think massive pieces of their supply chain. Industry experts are advising companies to look for ways to make their supply chains more resilient and add redundancies, despite the risks of increased complexity.
Consideration: Do you have enough data on your redundancies so when a switch needs to be made, you are able to make it quickly?
2. Capacity Changes
Over the first two quarters of 2022, capacity has flipped, where we are now experiencing an excess of capacity and not enough demand to fill that capacity. This reality has been coined the “freight recession.” Rates are falling and margins are shrinking for transportation and logistics companies. Many predict this is not necessarily a long-term situation, and balancing could come in two to three quarters, but those quarters could get ugly.
Consideration: How are you planning NOW to better predict demand changes in the future?
3. Customer Centricity
As capacity flips, companies that provide the best customer service will be positioned to take advantage and retain business through the current downturn. Customers are looking to digital tools to accomplish this, whether that means better tracking, compliance reporting, or providing more customer communication options.
Consideration: Is your customer experience giving customers what they need and how is your technology enabling that?
The need for visibility in the supply chain continues to prevail because of the demand shortage in the industry. Companies are trying to streamline operations using data to extract as much margin as possible.
Consideration: How could you improve your data management for more visibility across your business?
5. Environmental, social, and governance (ESG)
Environmental, social, and governance (ESG) are at the forefront of many minds in the transportation and logistics space. Sustainability continues to be a major priority — alternative fuel and electric vehicles, one way to make operations described “greener” is through Intermodal shipping options and increasing route efficiency.
“Ultimately, reducing emissions is great for us because that means we are running a more efficient operation.” - Chief Customer Officer at a National Transportation Company.
Consideration: Where can you improve operations while also improving sustainability?
6. Crowded Startup Ecosystem
The past two years of instability in the supply chain have led to much growth in the SaaS product area for supply chains. Many of these products are solving small and insulated problems. But while many of these SaaS products are helpful, integrating these apps and data remains an issue as they create further islands of technology and data. The need to provide a single, consolidated view of enterprise-wide data remains.
Consideration: Do you need another tool? Or do you need more connection?
When it comes to innovation during a freight recession in the supply chain, it is undeniable that tools integrated to help wrangle data from disparate systems will be extremely important as companies look for ways to become more resilient and effective.
We’ve recently written about 5 Changes in the transportation and logistics industry powered by better data to discuss a few areas we are seeing transportation and logistics leaders focus on when it comes to leveraging their data to run their business better.