At 63% of the total logistics costs reported in CSCMP’s most recent release of its Annual State of Logistics Report, transportation continues to be a significant portion of the total supply chain cost. Based on Profit Point’s recent Transportation Survey of industry leaders, 90+% of shippers identify cost, service and finding adequate transportation capacity as their continuing priorities.
Seven out of eight transportation managers and directors around the world expect their freight costs to increase over the next year while about the same fraction of decision-makers are concerned about finding adequate transportation capacity in the market. These results make a lot of sense given that almost two thirds of the freight included by the survey respondents moved in trucks; the sector that has seen the largest capacity reduction and will be most challenged when the economy moves into higher gear. Perhaps this over-arching concern for rising costs and scarcity of capacity explains why less than half of all respondents believe that “green” initiatives will impact their transportation plans within the next five years.
OK, so much for what you already knew about the current transportation market. Now, let’s take a look more intriguing findings from our survey data. First, we were quite surprised to find that one out of every four respondents was unable to confirm whether or not their most recent improvement projects in the transportation arena had any impact. Wow! We don’t envy those managers walking into their bosses’ offices trying to explain that their project “might have worked, but then again, it might not.” The ability to measure what’s going on in your transportation network is a prerequisite for improvement. Once again, we observe the fact that the computerization of the supply chain doesn’t always yield more information. Someone has to know that to collect and how to put it together before it can be useful.
The second intriguing finding in this year’s survey was that only 30% of respondents had been out in the market with a bid over the previous 12 months. With all of the change in the marketplace as carriers consolidate, remove capacity or go out of business we were surprised that so few shippers were out in the market forging agreements for capacity and making sure their rates were competitive.
Finally, 75% of our survey respondents continue to struggle with the trade-off between adding carriers to reduce costs and limiting the total number of carriers so they can be effectively managed for service and other improvements. With the number of different software packages and service providers in the market today that can explicitly quantify this trade-off in their bid optimization packages, there is clearly an opportunity to eliminate this struggle for most of these shippers.
After reviewing the survey results, we continue to advise our clients to hold someone in the organization accountable to know what they spend on freight, where they spend it and why they spend it. This also means providing them with the means to measure the spend as well the resources and tools to stay close to the market and manage not only the spend, but the relationships with the carriers, as well.
To read the complete report, visit Profit Point.
