The capacity crunch is real. When ports shut down, is your supply chain prepared to handle a disaster?
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When ports shut down, restrictions are put upon on an already stretched supply chain industry. Recently, the industry had to respond to several natural disasters – hurricanes, wildfires, floods – leading to closed ports and roadblocks across Georgia, Florida, Texas, and California. While recovery efforts continue across these states, the aftermath is being felt across the entire U.S., and putting further strain on truck capacity and supply chain resources at a time when shipping needs spike.
At different times, numerous ports such as those in Savannah, Tampa, and Miami all suspended operations due to storm related activity. Others, like the Port of Charleston, closed for an entire day, while ships were forcibly rerouted. This unfortunately added further stress in port cities and regional hubs and resulted in higher rates between carriers and brokers everywhere.
These recent hurricanes and other inevitable tragedies have taken a tight market and applied a vise grip to it. As of October, market data suggested FEMA had control of an estimated six to ten percent of the market with relief shipments, and their layover system is creating an environment where it is taking weeks for these drivers to get unloaded.
In addition to the recent weather related events that have caused volatility to transportation rates and capacity, the government mandated Electronic Logging Devices (ELD) for commercial trucks is also having a significant impact. The soft enforcement went into effect in December 2017 where non-compliant carriers are fined for not meeting the ELD requirements. Hard enforcement begins as of April 1, 2018, where non-compliant carriers and drivers will be placed out of service for violating the ELD rules. The total impact of how the ELD mandate will ultimately affect both transportation rates as well as capacity is still unknown. Many analysts believe it could have a four to seven percent impact on capacity and a five to 15 percent impact on carrier rates.
What can shippers do to prepare for and better navigate “the perfect storm”? Regrettably, if an organization is unprepared at this point in the year, there won’t be anything to do except pay the higher rates and execute where possible across the distribution network. There is no magic bullet. Organizations must get creative and survive the season. On the other hand, surviving the season and the pressures of the capacity crunch does not mean sitting back and bracing for impact. Companies must have a strategy to prepare for future natural disasters or rises in consumer demands.
If an organization is still operating on a static, closed, on-premise transportation solution, they have no flexibility to adapt. Everything becomes more difficult on these systems, including connecting with new partners, new carriers, and optimizing routes. Finding, locating, and preparing new carriers or new lanes will require a long and manual process. These systems truly limit an organization’s ability to react to changing conditions.
The first step in developing a “preparedness” strategy is to join a network. The power of a network lies in its ability to bring clarity and certainty to a volatile situation and can offer “on-demand” connections to thousands of potential carriers. Forming connections, processes and identifying new capacity can be found and accessed faster than ever.
As part of joining a network, organizations should ask if doing so will also provide these benefits to strengthen their supply chain solution:
- A global capability – Does it create a more resilient network that will allow a business to sell across borders and trade zones like it’s right next door? Can systems be updated easily as new custom requirements are put into effect?
- Value flexibility above the certainty of the status quo – Supply chain managers cannot afford to sit still with static supply chains and think they’re prepared. Those that make the extra effort to prepare for multiple scenarios will be able to satisfy their customers in times of trouble.
- Provide supply/demand insight – Market data combined with a deep network can help secure the best rates and protect an organization’s budget. For example, with a global-trade-network view of the market, Logistics as a Service (LaaS) customers have the potential to keep rates lower than with a limited view of providers.
- Seek best-practice solutions – Does the solution provide the capability to capture and identify successful new processes, ideas, and technologies so they can be learned and implemented based on proven results? Once identified, can these advancements be learned and implemented faster than the competition?
Flexible, adaptable supply chain solutions position an organization for success. Supply chain is the competitive battleground of the future. Organizations that start planning for unavoidable roadblocks / disasters now, will be able to live to tell the tale.
Jeff Potts is Vice President of Client Services at BluJay Solutions, leading the company’s client services group in North America. He has over 30 years of experience in the transportation industry including roles in sales, consulting, and business development, as well as co-founder of the former LeanLogistics. Jeff brings a wealth of diverse supply chain knowledge and a deep understanding of the industry to his role and every customer interaction.