The Benefits of Digitizing Food Logistics and AI power for Shippers
Shipping food products is a complicated process and involves a lot of coordination between logistics ...Read More
Supply chains have transformed tremendously over time to meet growing consumer demand and fluctuating supply of goods and raw materials. Supply chain leaders are tasked with designing a freight network “that offers consistent and reliable delivery services” while remaining adaptive to “customer requirements” and continues to improve “operating efficiency.”
Harvard Business Review highlights the lasting effects Coronavirus has had on supply chain networks in their analysis stating that “many things are not going to change. Consumers will continue to want low prices (especially in a recession), and firms won’t be able to charge more just because they manufacture in higher-cost home markets.”
Once businesses began to reopen in the summer, manufacturers needed to produce more quickly. The Wall Street Journal noted that these conditions “could set off what is known as the “bullwhip effect,” in which efforts to restock while meeting increased demand travel through supply chains, affecting finished-goods manufacturers, makers of parts and components and raw-materials suppliers.” With companies seeking to meet the recovering demand, they need to bolster their operations and quickly address any vulnerabilities in their supply chain that the pandemic exposed.
With an increased need to move goods and materials, would the typical workflow supply chain leaders share to procure transportation keep up with these extreme circumstances? First, they look to their internal carrier network. Then, they enlist the support of freight brokers. After exhausting these options, digital freight marketplaces become “a great way for shippers and carriers to quickly expand their operating networks.” Journal of Commerce explains the digital freight marketplace’s key function: “at its core, digital freight matching is about more efficiently connecting sources of freight with sources of capacity that would otherwise have no way to find one another.”
It may be difficult to discern how a digital freight marketplace differs from a freight broker -- digital or not. However, FreightWaves makes a clear distinction between the two by noting “in terms of the value proposition to customers, every digital freight marketplace would also function as a digital freight brokerage but not every digital freight brokerage would be a true marketplace.” While they both match shippers to carriers, the vast network provided by digital freight marketplaces enables shippers to book trucks more quickly and at a lower price.
Manufacturers have become accustomed to the capacity crunch due peak shipping season, however, this peak season shipping offers a new set of challenges. This may be the primary reason for the spot market reaching record highs. Rather than making additional investments, there are strategies to help managers better utilize digital freight marketplaces beyond expanding carrier networks.
Supply chain leaders should leverage digital marketplaces alongside their internal carrier networks. By managing RFPs for your existing carrier network and a digital freight marketplace simultaneously, companies will be able to increase their chances of finding a carrier faster and at a lower price.
In some cases, companies have minimal leniency, if any, with their transportation budgets. Automating bid acceptance when a carrier agrees to the set price accelerates the planning and allows employees to focus on other projects instead of manually checking for carriers bids.
Lastly, logistics executives should refrain from using the spot market “as a last resort and start viewing it as a strategic tool.” This minimizes any surprise blows to freight spend.
Technology can enhance operations, simplify decision-making, and provide valued insight. At the end of the day, every hypothetical situation cannot be planned and prepared for. Nonetheless, pursuing proactive risk mitigation creates more protection against cyclical events such as peak season shipping and black swan events.