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There hasn't been a silver bullet to resolve the problems revealed in the past 24 months. Digital transportation management platforms can help partners and shippers grow together by building essential capabilities for insourced and outsourced models.
FREMONT, CA: The past twenty-four months have exposed the weaknesses of supply chains, and there appears to be no silver bullet available to remedy this problem. However, digital transportation management solutions can help develop essential capabilities for insourced and outsourced models, enabling shippers and their partners to expand simultaneously.
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The perfect storm has arrived and will persist
Logistics, especially road transportation as a supporting function, has not been a top management focus over the last few decades, despite being an essential component of the value chain. Most chief procurement and operating officers have only one philosophy: to provide dependable services at the lowest possible cost. For instance, trucking in Europe is highly fragmented, allowing for the exchange of carriers with a high degree of flexibility. This reduces profits and causes rush loads and unacceptably tricky conditions for drivers.
This operational approach was, however, interrupted by the COVID-19 pandemic. Lockouts and production halts drastically reduced the need for transportation, forcing carriers to restrict their operations. Due to this, even though economies recovered rapidly and stockpiles needed to be replenished, there was insufficient capacity to handle the increased demand. This, combined with an increase in drivers retiring or switching industries, has resulted in capacity shortages.
Transportation management involves the physical movement of commodities to their final destination. Carrier management and development are included in this approach to maintain stable control tower operations and ensure end-to-end visibility across the supply chain. The strategic pillars complement shippers' responsibility by providing directive tasks designed to maintain cost-effective freight rates and develop networks that meet sustainability objectives.
Shippers historically measured the success of their logistics units based solely on cost efficiency, and this performance metric was supplemented with quality and time indicators at best. In the current market environment, this conventional magic triangle of logistics optimization is failing and will continue to fail, which is unsettling. Performance metrics must go beyond cost alone for shippers.
Cost: Optimizing the profit and loss statement is an important priority. Purchasing professionals in logistics must maintain competitive cost levels to meet demand. Cost savings, however, will no longer be the sole indicator of performance; the other four aspects described above will also be considered.
Service: Customers have become accustomed to receiving their orders the next day without additional charges, and as a result, the need for responsive, fast service has grown. Moreover, customers wish to obtain information regarding their shipments so that they may monitor their progress and obtain an estimate of when they are expected to arrive. A bare minimum of non-customized services is no longer acceptable to consumers.
Resilience and agility: A resilient shipper can endure unanticipated shocks and competitive adjustments while maintaining adequate transportation capacity. Resilience is strengthened by agility. An agile shipper has the methods and tools to deploy assets most efficiently, considering other factors, such as using intermodal transport modes with lower emissions. Companies should prioritize the construction of a strong foundation that can withstand disruptive events while allowing them to adapt to changing market conditions.
Resilience and circularity: Optimizing logistics does not only consider sustainability. Logistics management must address many ESG objectives, such as providing decent working conditions for drivers. Further, the need to contribute to circular economies will create additional logistical challenges.
Capital: Recent production halts and decreased sales are putting significant strain on shippers' cash flows; optimizing working capital will become increasingly important. Shippers should evaluate how logistics will affect their working capital in addition to investing in facilities, equipment, and technology. The need for this is particularly acute in light of recent disruptions and the temptation to accumulate more significant quantities of safety stock.
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