Analyst Insight: The transportation sector continues to face turbulence fueled by geopolitical volatility, physical climate disruptions and a soft freight market. These factors created significant challenges in 2023, including rising operational costs that impacted each step in the supply chain. While these challenges aren’t going away, the start of a new year creates an opportunity for shippers to evaluate their transportation strategy at the micro and macro level, and adopt a more proactive and resilient approach. 

Shippers are struggling to balance fluctuations in consumer spending with industry costs, while simultaneously contending with the impact of climate change. To thrive in this environment, they need to optimize three key aspects of their operations: fuel, freight and sustainability.

Embrace the future of diesel. A recent study showed that 51% of shippers remain deeply concerned about unpredictable diesel costs. There are several geopolitical and global factors contributing to unpredictability in the diesel market, including inflation, the Russia-Ukraine War, oil inventories reaching multi-year lows, and alternative energy adoption. Collectively, these events impact shippers’ budgets and transportation networks. In 2024, shippers need to deepen their understanding of alternative energy sources such as renewable natural gas, renewable diesel, electric and hydrogen. To start, they should assess existing infrastructure, especially partners with alternative fuel fleets, while also considering how these alternatives will influence their carbon footprint, and at what cost. With a granular view, shippers can proactively identify specific opportunities to decrease emissions and deliver the service required in their networks.

Diversify transportation supply chain operations. Extreme weather and climate change-related events have significantly disrupted the transportation sector. From the ongoing Panama Canal drought, resulting in restrictions on vessel passages due to record-low water levels, to hurricanes like Idalia causing substantial damage to the region's infrastructure, climate-based disruptions are here to stay. While shippers can decarbonize their transportation networks, they can also fortify their business by constructing a transportation network that’s able to withstand or accommodate future disruptions. To increase agility, they should focus on strengthening relationships with existing carrier partners as well as new ones that best fit their network. This is crucial to ensuring network agility, particularly when adverse weather conditions jeopardize shipping freight. Additionally, a deeper understanding of lane-by-lane movements and macroeconomic conditions can enable shippers to smoothly navigate unforeseen events.

Prioritize a greater understanding of your carbon footprint. Due to persistent macroeconomic factors, 61% of transportation leaders face growing challenges in meeting emissions reduction goals over the next 12 months. As the Climate Disclosure Ruling decision draws near and decarbonization legislation remains a priority, shippers will need to know the emissions intensity of a given shipment to understand how it contributes to total lifecycle emissions. Data-driven insights from a strategic transportation management partner not only help shippers identify efficiencies, but also create a forward-looking and nimble strategy that can evolve with impending legislation and decarbonization mandates. 

Outlook: In 2024, shippers must fully utilize their technology stack by embracing data, exploring opportunities to incorporate alternative energies and strengthening carrier relationships. With an agile strategy, they can better navigate uncertainty driven by geopolitics, the environment and the economy. By embarking on a data-driven journey, no matter how small the first step, they can amplify transparency and optimize fuel, freight and sustainability throughout the transportation network. 

Resource Link:

www.breakthroughfuel.com