The Softening Market of Supply Chain
COVID-19 has significantly impacted the supply chain for the past two+ years. With the pressure index spiking at the heart of the pandemic, freight rates also hit an all-time high.
Now that the market is softening, supply chain leaders hope that freight rates will continue to decline and the market will finally return to normal.
However, even as the market improves, there are more changes in store for supply chains.
Companies need to be prepared for possible volatility in 2023.
Learn from the effects of the COVID-19 pandemic and get the right technology in place to manage transportation spending.
As a leader in Transportation Spend Management solutions, Trax offers global enterprises the opportunity to future-proof their business. Trax empowers carriers and shippers to work together in changing market conditions through advanced freight auditing software that enables spend visibility. Learn more here.
Determining the Current Market State
The first step to preparing for a market change is understanding the current market state. C.H. Robinson’s insights and advisories indicate an oversupplied or undersupplied market state in the supply chain.
Three of the primary considerations are freight volume, capacity, and costs. Based on these features, forecasts were made for full truckload, intermodal, and less-than-truckload (LTL) shipping.
Some of the indicators of an oversupplied market include year-over-year fleet growth, an increase in employee-based and independent contractor capacity, declining LTR, and changes in cost per mile to operate a truck. Identifying the signs of an oversupplied market and developing an appropriate strategy is the key to remaining competitive in the supply chain.
Recommendations for the current period in the market cycle include developing transportation strategies for the upcycle and focusing on driver experience to maintain capacity.
What The Last Mile Market Taught Supply Chain Leaders
To prepare for the next market cycle shift, companies should look back at past disruptions in the supply chain. Reflecting on events is important for developing their next strategy. For example, looking at the effects of the COVID-19 pandemic on the supply chain, the last-mile market experienced a 40% growth rate year-over-year.
Sales surged for fitness equipment, computers, and furniture for the home. Things have shifted since the beginning of COVID-19. While consumers are still ordering goods for delivery, people are starting to scale back on things like electronics and office furniture, instead focusing on things for travel, entertainment, and overall experiences.
The major lesson here is that consumers were buying big and bulky goods at a pace that couldn’t be sustained, and therefore supply chain leaders had to be ready to adjust at any moment.
How to Prepare for Future Disruptions
Future demand is difficult to predict. Still, there are ways that supply chains can prepare for disruptions in the market and essentially “future-proof” their business.
1. Focus on operational and inventory visibility
Part of making data-driven decisions is having end-to-end visibility of a company’s transportation spending. Real-time transportation visibility platforms allow customers to track the lifecycle of goods and deliver meaningful insights into transportation costs and performance. Once a company has access to a reliable transportation spend management platform, the next step is implementing technology to achieve intelligent visibility. This involves building machine learning algorithms and artificial intelligence for automating business processes and reporting.
2. Balance Sales, Inventory, and Operations Planning (SIOP)
According to MDM, SIOP involves combining disparate functional plans into one cohesive business plan - for instance, breaking down silos between sales, marketing, supply chain, product management, and more. A SIOP process allows businesses to improve their forecasting, resource planning, ROI, and inventory levels. However, part of implementing a solid SIOP plan includes having high-quality data, meaning that having the right transportation spend management software in place is a prerequisite to making major changes.
3. Prioritize Environmental, Social, and Governance (ESG) for ROI
Environmental, Social, and Governance (ESG) is both a moral obligation and a factor impacting ROI and long-term success in the supply chain. Regarding forecasting 2023, carbon offsetting, carbon insetting, and carbon reporting standards promise new opportunities for companies to pursue innovative ESG initiatives. As a leader in transportation spend management, Trax decided to face ESG issues directly by developing its proprietary Carbon Emissions Manager.
By keeping these strategies in mind and continuously working to make data-driven decisions, global enterprises remain competitive during a shift from an undersupplied market state to an oversupplied market state.
The Power of Transportation Spend Management Maturity
With the market seemingly returning to normal, it’s important to remain vigilant regarding supply chain logistics. The volatility from the COVID-19 pandemic has leveled off and freight rates are at a low, but this presents new challenges for supply chain leaders.
Having the right transportation spend management solution in place is key to preparing for a changing market state.
As a trusted provider to supply chain, transportation, and logistics companies, Trax offers global transportation spend management solutions that deliver data-based visibility and insights, higher savings, and better control of transportation spend.
Contact us today to connect with our team of TSM experts.
Trax is the global leader in Transportation Spend Management solutions. We partner with the most global and complex brands to drive meaningful optimizations and savings through industry-leading technology solutions and world-class advisory services. With the largest global footprint spanning North America, Latin America, Asia, and Europe, we enable our clients to have greater control over their transportation performance and spend. Our focus is on your success.