Expected Shipping Challenges of 2021
Martin Pahulje - September 28, 2021
The past year has been unpredictable and hectic for freight procurement and supply chain logistics management. In addition to an unforeseen blockage of the Suez Canal, the consequences of the pandemic have caused damaging shortages and disruptions for global supply chains – from shipping lines, ports, warehouses, factories, and more. While shippers and manufacturers are slowly beginning to recover, they are still likely to face residual challenges in 2021. If the past year has taught us anything, it is the importance of resilience. To overcome these challenges and future ones, companies must find creative solutions for shipping challenges.
Due to the COVID-19 pandemic, consumers have been placing orders online at an unpredictable rate, contributing considerably to new demands on freight capacity. While this may seem like good business for shipping companies, freight capacity cannot keep up. As a result, truck capacity has been drastically fluctuating over the past year, creating a series of supply chain challenges. With limited freight capacity, freight rates are skyrocketing, and shipments are experiencing severe delays. Not only is this damaging to shippers themselves, but it will have a negative impact on customer satisfaction as demand grows. There seems to be no sign of a decrease in online shopping activity, so shippers must find a solution to their capacity challenge.
As the market continues to swing, shippers must remain aware of the current freight market supply and demand to manage carrier payments. With limited capacity, many distribution centers are no longer accepting shipments, leaving shippers with idle products. Not only does this increase detention and storage charges, but it complicates shipper and carrier relationships. To resolve this issue, shippers should review their carrier contracts, ensuring that their products can be moved. Seeking alternative carriers and digitizing shipping operations can help shippers overcome these challenges. Additional transportation logistics solutions may include using fewer carriers, consolidating shipments where possible, and single-sourcing. It is also critical that shippers consolidate their shipments as much as possible, allowing you to lower costs and ensure adequate truck coverage. The less often you ship, the less risk of not obtaining capacity for your loads.
Another often-overlooked solution to freight capacity issues is to leverage your relationship with carriers. By becoming an ideal shipper, you can make your shipments as desirable as possible to carriers. The freight load itself, in addition to your business practices and location, should create an efficient and positive experience for carriers. As a shipper of choice, carriers may be more likely to prioritize your business over others.
It is evident that supply chain shortages are drastically impacting shippers and carriers. Countless materials are inaccessible to manufacturers, delaying the entire supply chain network. Often, when we think of materials, what comes to mind is tangible goods. Unfortunately, in addition to a shortage of many materials, supply chains are also experiencing a labor shortage. Specifically, in transportation, there is a growing demand for truck drivers and a dwindling supply. This shortage heavily contributes to shipping challenges as, without drivers, products cannot be shipped between plants or to their final destination.
Fortunately, one solution to this is on-demand trucking. While a relatively new concept, on-demand trucking allows shippers to find available truck drivers with the right space, in the right location, in real-time. While truck drivers are still in high demand, this system matches shippers with the workforce they need to fulfill shipments efficiently and on time. In addition to matching capacities, this solution offers real-time pricing and mapping functions, allowing shippers complete insights into the market and shipping environment. This is critical for minimizing costs and maximizing the efficiency of your shipments. Not only does on-demand trucking benefit shippers, but the market as a whole. By matching shippers and truckers, there is a growing potential for improved capacity utilization in the market – which is desperately needed.
Congestion and Blank Sailings
While the Suez Canal is no longer blocked, the effects of its six-day blockage are still lingering. While the canal was inaccessible, hundreds of ships faced delayed arrivals, creating a ripple effect on terminal, warehousing, and trucking operations. As a result, shipping fleets experienced significant delays, and they are still recovering. Even before the blockage, ports dealt with prolonged congestion and large-scale labor shortages due to the pandemic, so this blockage only worsened matters. In addition to these considerable delays, shipping lines face serious scheduling problems, forcing them to plan blank sailings. In blanking a sail, shippers are cancelling all or part of their voyage, worsening current shipping problems.
To combat congestion issues such as these, shippers must act early on warning signs of delays and re-route cargo early. By proactively adjusting schedules, shippers and carriers can avoid some of the significant costs associated with storage and re-routing. With transportation planning and scheduling technology, shippers can analyze various routes and determine the most optimal transport scenario. This will save shippers time and money, ensuring that orders are receiving on time. Additionally, with optimized route planning, shippers can be alerted of delays, allowing them to re-route shipments before delays become detrimental. With predictive technology, shippers can even run shipping scenarios to test the most effective routes with delays, traffic, and weather conditions in mind.
Increased Accessorial Costs
Traditionally, shippers allocate 5-10% of their trucking budget to cover unplanned accessorials, which are fees added to a freight bill for additional carrier services. This year’s supply chain disruptions have contributed to shipper’s expenses in the form of detention and storage fees at ports, demurrage, and rescheduling charges due to cargo rollovers and blank sailings. As shippers cannot transport their products due to their delays, they are left to incur the costs of storage and delays. In addition to these accessorials, shippers are spending more to stock up on extra inventory in defence of rising shortages.
Exploring alternative carriers can be a great solution to minimizing transportation and accessorial costs. It is possible that the carrier you utilize may be charging more than a competitor would. By reviewing service levels and pricing of carriers, you can compare carriers and find one that fits your budget and needs better. Even better, if you find several suitable carriers, you can keep them on file and rate shop between them and have a list of adequate back-ups should you need them. With several approved carriers, you can seek alternative transportation services should a backup or disruption occur with one.
Combatting Shipping Challenges
The shipping challenges brought on by the pandemic are considerable. For shipping companies, it is critical to optimize their supply chain processes, ensuring efficiency and resiliency. With improved carrier relationships, transportation logistics technology, and route optimization software, you can improve your shipping processes to withstand these challenges. By acting proactively, you can minimize the damage of delays and labor and capacity shortages. Digitization and creative thinking are the solutions to the shipping challenges of 2021, reinventing the last mile.
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