By Blake Tablak, CEO of Trax Technologies
For a long time, supply chain leaders could treat cost and supply chain resilience as separate conversations. If one part of your network was turbulent or difficult, you invested in resilience there, and wherever things were more locked down, you went after cost reduction. I don't think anyone has that luxury anymore.
I made this point during a recent Trax discussion on how supply chain priorities are changing, and it reflects what I hear from every logistics operations and supply chain leader I meet with. They carry the weight of cost cutting around their necks, and they're also expected to get product there on time and in good shape, because we can't recognize and generate revenue without it. Both pressures sit on the same desk now.
Resilience will probably take precedence at times, since product has to get to market. It can't come at all costs, because missing on margin is punitive for a public company. That leaves a practical question about where the money for resilience comes from, and in my view the answer is efficiency in the parts of your operation you can control.
Fund Supply Chain Resilience With What You Can Control
The first step is getting a good understanding of what's happening in your environment. From there, the way to control costs while still investing in risk management is to optimize the stuff you can control, and that has to come through really good visibility and data. The money you save by improving efficiency is what goes into resilience or into cost savings.
The traditional tools on their own aren't getting it done. We looked at one company that ran a round of RFPs to lower its overall freight cost and ended up spending more per kilogram, because accessorial charges had climbed. Some of that was fuel. Some of it was duplicative security charges, and some came from how freight was put together, where a single battery on a pallet of inert plastic objects can trigger a hazardous materials charge for the whole pallet. None of that gets fixed at the bidding table. It gets fixed through live visibility into what you're paying for.
Learn to Operate in Constant Volatility
The big headlines get most of the attention, whether that's geopolitical conflict, tariffs or labor action like the strike in Canadian rail. The shocks are constant, and the lesson for companies is that you have to be very aware of your surroundings.
When that rail strike hit, our customers didn't get caught up in it. They could log into their rate data and see how many times they were using those rates, which routes they were using and the full flow of goods. Figuring out how to reroute took minutes instead of months of digging through information.
Good data is only part of it. Volatility is happening constantly, and you have to become really comfortable living in it. That's where a decision-making framework helps: you use the data you have, you draw on experience and whatever remains is the risk you're choosing to take. Leaders who get creative within that framework are the ones who can balance resilience and cost at the same time.
Turn Data Into Intelligence
Data always tops the list of priorities for good reason, and the way I'd frame the goal is intelligence. Systems can now analyze really big data sets in very short periods of time, and those systems still get things wrong. There's a lot of hallucination in AI, so you still need human intelligence, creativity and Q&A to figure out whether the information is right. Making a good decision on bad data can be costly, and most companies don't have an unlimited budget for running these analyses either.
I'd prioritize three things in order:
- Understand where good data lives.
- Understand how you create intelligence out of that data.
- Keep that intelligence up to date.
If you're working with multiple freight auditors or visibility platforms, turning that fragmented information into intelligence becomes a skill you need to build internally.
Get Out of Constant Firefighting
There are things you can't plan for, so every major operation needs a reactive problem-solving muscle. When reacting is all you're doing, though, the planning piece comes down to the intelligence you can muster through data. When we presented some of our analysis to pharmaceutical clients, it separated cold chain from non-cold chain and showed what was easier to deal with and what was harder. That gets you to most of the decision right away. If it takes weeks or months to get information into a usable state, you can miss the window and end up back in reactive mode.
The other piece is end-to-end process mapping. Nobody loves being audited. Internal audits are still wildly helpful, especially when they look at how you handle expense management, spot quotes and similar processes. You don't need an outside provider for this. You can put an internal audit or process person on it and have them look at the whole thing end to end.
Resilience and Margin Come From the Same Work
Getting really good with data, getting really good with intelligence and understanding your processes end to end are what move an organization from constant firefighting into proactive planning. They're also what free up the money to invest in resilience without giving up margin.
Watch the full conversation, find more insights from Blake on the Trax blog or talk with the Trax team about building better visibility into your transportation spend.