Analyst Insight: Transportation is undergoing massive volatility resulting from economic uncertainty, the ongoing fuel crisis and an overall shift in demand. Collectively, these threats pose critical challenges for consumers, businesses and shippers in 2023.
In the face of a vast degree of uncertainty, agile transportation management strategies are becoming more critical to navigate the market. Looking ahead, shippers need to reflect on their fuel, freight and sustainability practices in order to regain control of and advance their supply chains.
In balancing consumer expectations, complying with new government regulations and battling increased costs, shippers are constantly finding themselves at a crossroads. They must home in on three critical areas — fuel, freight and sustainability — to achieve a holistic approach to their operations. Following are some actions they must take to achieve traction in a recessionary environment.
Implement fuel forecasting strategies. The current economic climate is prompting a “backwardation” trend — whereby the current price of an underlying asset is higher than prices trading in futures markets — alongside a continuing fuel crisis. As a result of this structure, fuel costs continued to rise in 2022, quickly becoming a top energy market concern. However, as we move into 2023, fuel costs are forecasted to gradually decline. And while that’s a step in the right direction, shippers need to create and maintain better overall visibility of transportation data, so as to think more strategically about their use of fuel. For example, by examining supply chain data and demand forecasts, shippers gain a more accurate view of how demand for trucks will fluctuate over the coming year, and how that could affect fuel consumption. Combining these strategic insights with accurate fuel pricing forecasts can help them identify patterns and factor fuel costs into ongoing budgeting.
Become more strategic by building enduring relationships within the freight network. Although this should be common practice beyond times of economic uncertainty, it’s vital for shippers to honor contracts and increase volume, if possible, with favored carriers in 2023. To achieve this, they must reflect on the transportation network to see what’s working and what isn’t. Are there areas where new carrier partnerships would improve the stability of the network? What changes will work within the network, and which carriers fit well into that bottom line? By being more proactive in decision-making, companies can open more opportunities to build not only fair and equitable partnership, but also sustainable ones.
Support emissions reduction with transparent data and technology. Such actions not only protect the bottom line, but also lead to emissions reductions in times of economic hardship. As more companies begin to disclose their greenhouse gas emissions and the risks they face from climate change, shippers will need to dedicate time to calculate their overall emissions baseline. Gaining visibility into fuel costs and consumption is the first step toward setting sustainability goals, such as reducing Scope 3 emissions. By investing in new technologies and data transparency, shippers can realize the full potential of the significant changes to transportation that are due to occur over the next decade, including the proliferation of autonomous and alternative energy vehicles.
Outlook: In 2023, shippers need to prioritize the implementation of real-time data to thrive not only in today’s fast-paced transportation market, but also during times of persistent economic uncertainty. Market volatility continues to alter the picture on a near-daily basis. The first step in coping with it is the effective management of fuel, freight, sustainability initiatives and data. Together they’ll improve transparency across the entire organization — with a significant impact on the bottom line.
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