While shippers work to overcome the challenges introduced by COVID-19 and settle into this new world, a focused approach bridged by digital capabilities will help bring some semblance of order out of the uncertainty. Here are three areas to consider on your way to stabilization.


The global COVID-19 pandemic has caused extreme volatility in supply and demand, disrupting supply chains unlike any other crisis. People around the world are living differently and buying differently. No business has been immune to the shifts driven by this crisis, but the freight and logistics industry in particular has experienced profound effects.

The accelerated shift to e-commerce has been one of the biggest impacts on shippers, and it’s a trend that is here to stay. Our research shows that the proportion of online purchases by infrequent e-commerce users—those who used online channels for less than 25% of purchases prior to the outbreak—has increased 160% since the outbreak.

As a result, there has been an exponential increase in demand for parcel shipments, which has already exceeded last year’s peak holiday demand. Furthermore, customers have made it clear that when given a choice between standard shipping of three business days to five business days and same-day delivery, they want the faster option thus increasing the focus on “last-mile” delivery.

Our analysis predicts that more than 50% of global e-commerce purchases will be sourced locally by 2023—a number that could easily rise to 70% by 2025. This real-time shift to e-commerce as the preferred buying channel for consumers these days along with the global disruptions from COVID-19 has affected everything in transportation management.

Parcel

From new surcharges on larger shippers, constrained capacities, service level guarantees suspensions, and uncertainty of USPS short term changes, the parcel market has kept shippers on their toes trying to move goods one package at a time.

With e-commerce demand exceeding peak levels normally seen during the retail holiday seasons, parcel providers have been working around the clock to build capacities to match the demand. However, the record high volumes for this time of year have not translated to higher growth as profit levels did not follow commensurately.

This has clearly factored into carriers’ rate structures and new surcharges as they work to recover profits that were missed in earlier quarters. At Accenture, we expect upward pressure on parcel rates to continue as providers increase capacities to meet demand. Rate pressure should ease in early 2021 after providers have caught up to the growing demand and the annual general rate adjustments are implemented.

Truckload

Truckload volumes, which saw a demand drop in the early stages of the pandemic, have seen a steady rise and are expected to be back to pre-pandemic levels in the short term—although they are still well below year-over-year levels.

According to the CASS Freight Index for July 2020, shipment volumes were down 13.1% relative to same time in 2019, but are growing. However, recent economic indicators are showing potentially weaker demand than expected moving into the fall. Spot rates should begin to relax from the historical levels they’re currently at and provide opportunity for shippers to lock in lower rates before the end of the year.

Rail movements

While North America total volumes are down 12% year-over-year, according to the Association of American Railroads (AAR), as we move into the fall, rail movements are also expected to be back to similar levels seen in January and February of this year.

These increases in volumes are due to imports coming back online. Pushing eastbound loads from West Coast ports have helped to normalize rail traffic, which is seeing increases in intermodal moves, while carloads are still down relative to the prior year according to the AAR. Based on this, we expect rates and capacities to normalize over the next few months as supply and demand balance out.

Outmaneuvering uncertainty

Each of these pressures can be dealt with on their own, but when combined together with the backdrop of the current pandemic, they create real challenges.

The impacts of increasing e-commerce, combined with product shortages, workforce changes, demands for contactless deliveries, and the need to balance operations with real-time dynamic changes to local and federal health mandates has turned transformation management into a chess game.

Companies can no longer just plan for their next move. They must be thinking several moves ahead and taking into consideration all the supply chain interactions in between. For example, if unload times are increasing at customer sites, that will have a direct impact on how assets get cycled, furthering the complexities that shippers were already facing prior to the pandemic.

There are many unknowns right now, but what we do know is uncertainty is here to stay. We also know that it’s very likely that demand for e-commerce will continue indefinitely, along with a permanent change to the way consumers prefer to have goods delivered. Today shippers are working hour by hour, leveraging their relationships with the carrier community, to get trucks matched to loads.

While this is certainly not a sustainable path, it’s what’s needed to move product where it needs to go as we continue to navigate a path forward. As the saying goes, you should never let a good crisis go to waste—and now is the time to start to pivot and exploit the right technologies to bring the right level of agility and intelligence to best navigate these choppy waters.

 

Shippers will need to continually correct their course by reassessing assumptions, reevaluating scenarios and strengthening their ability to predict and respond during this prolonged period of uncertainty. They need to position their business for greater resilience and productivity in a future where “business as usual” no longer exists.

With this in mind, we offer these three key steps that shippers can take to move forward and bring profitable growth to their businesses.

  1. Provide real-time visibility into supply chain activities. Visibility is not just “seeing” what is going on—but having a real understanding of where goods and assets are, what their immediate demands look like, and how the overall network is adjusting dynamically to the current markets.

This level of visibility requires the application of a transformative mindset to both manage and leverage the data in conjunction with best of breed analytical tools to foster superior decision-making capabilities and foresee challenges that are beginning to manifest in the supply chain.

Our research shows that supply chain leaders are investing in new technologies to turn data into insights. As they mature, they move from diagnostic to predictive and prescriptive business models. This helps provide a solid basis for collaboration inside the company and with ecosystem partners to meet customer expectations.

  1. Broaden and strengthen ecosystem relationships with ongoing and collaborative communications. Ecosystem relationships not only help keep partners on the same page, but also provide a platform to drive new value propositions to customers. This, along with the right level of visibility, can help to provide the right network configurations to bring flexibility and responsiveness—while being asset light—to drive cost efficiency and optimization across the entire value chain.

Especially in the B2C space, hyper-personalized experiences bring a complexity that makes collaborative innovation, internally and with ecosystem partners, a must. Innovation center networks are helping more companies make collaborative innovation a reality.

  1. Deploy the right set of digital capabilities that will deliver the needed agility to pivot toward growth. Every supply chain team today should be constantly evaluating which digital tools and capabilities are available to them to drive a more interconnected network and put in place the building blocks to create a truly intelligent supply chain that will become an engine for growth.

For example, leading B2B companies are moving toward a product-as-a-service model and are integrating blockchain with AI, the Internet of Things (IoT) and robotics to enhance their capabilities in this area.

On the other hand, B2C are building warehouse automation capabilities and implementing machine-to-machine order management to achieve speed and accuracy in fulfilling consumer orders but also enable customization at a micro level. In the short term, shippers should focus on those digital tools that will help bring together the ecosystem, creating the needed visibility to drive day-to-day operations.

After shippers stabilize their operations by focusing on the three areas above, they will be in position to make the transformative journey to the intelligent supply chain that delivers a true customer-centric supply chain infused with intelligence.

While we work to overcome the challenges faced by COVID-19 and settle into this new world, a focused approach bridged by digital capabilities will help bring some semblance of order out of the uncertainty we all face today.

 

Source: https://www.logisticsmgmt.com/article/the_new_transportation_management_playbook