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Home » Blogs » Think Tank » Three Indicators to Inform Freight Decisions During a Crisis

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Coronavirus / Transportation & Distribution / Supply Chain Planning & Optimization / Supply Chain Security & Risk Mgmt

Three Indicators to Inform Freight Decisions During a Crisis

Freight Decisions During a Crisis
June 10, 2020
Heather Mueller, SCB Contributor

In the midst of the COVID-19 pandemic, it’s important for shippers to think of transportation as an ecosystem. Each diverse player is being influenced by different factors to varying degrees, creating new challenges and opportunities when it comes to moving freight.

As you work to create new supply-chain strategies during these uncertain times, here are three things from the last big recession that can help you survive in the current shipping landscape.

Consumer sentiment. This has always been an indication of freight demand. Economic indicators of this sort can be used to create models for the future, based on performance through historically similar experiences.

As confidence in the economy rises, so do spending and freight demand. Uncertainty, on the other hand, makes consumers nervous. Today we face unprecedented levels of uncertainty in the economic and financial landscape, as we have yet to understand the magnitude and duration of COVID-19’s influence. In fact, we did not see this level of uncertainty during the Great Recession of 2007-2009. As a result, many consumers are saving their money for the possibility of lasting financial hardship.

Given the current economic environment, consumer sentiment will be an even more important indicator for Q2 and Q3 freight planning. People aren’t confident about tomorrow’s financial situation, and many are facing layoffs and furloughs, causing them to slow spending and dampening overall demand for certain goods. Even those who would like to spend their capital are limited in their ability to do so, given shelter-in-place and social-distancing orders.

The way consumers feel about the health of the economy, their livelihoods, and their role in economic activity reflects a major segment of demand generation for products and, as a result, freight.

The goods you’re shipping. The biggest differentiating factors among shippers brought on by COVID-19 are based on the goods being shipped, and where they’re coming from and going.

During the Great Recession, sales of durable and non-durable goods fell in line with consumer sentiment. Durable goods with longer purchase cycles, such as cars and refrigerators, began their decline several months before the dip in non-durables, which include products such as toilet paper and deodorant.

Leading up to the economic downturn, non-durable goods saw a brief increase as people stockpiled, but once consumers felt they were well-stocked, those items saw a faster drop than that of durables. Non-durable goods also experienced a more rapid recovery, as consumers had to buy more food and essential products well before they needed appliances and other durables.

At its peak during the week of March 22, non-durables shipment volume was up by roughly 20% year-over-year. At the same time, durables shipment volume was down 27%, and hit its lowest point the week of April 5 with a 52% YOY decrease. Other factors influencing freight dynamics include whether the goods in question are considered essential, the geography and risk level of retail locations, and regulations in force in key geographies. Businesses can become better informed about the cost and service factors facing freight flows in the coming months by reviewing the supply-and-demand dynamics of both shipper and carrier networks.

The collective freight ecosystem. While it’s important for shippers to seek answers for their fluctuating networks and review trends in the data, this only tells half the story. Examining specific carrier networks, changing freight needs, and service levels within an organization’s scope of influence can provide a good idea of current and historical challenges, but you’re missing out on how all the other pieces in the ecosystem are being affected.

The most effective supply-chain strategies during these times will come from awareness of changes across the collective freight ecosystem. Viewing the full picture of the broader marketplace allows shippers to effectively navigate their own challenges and source the right capacity through uncertain times. By relying on robust data backed by sound market fundamentals, and factoring in considerations like consumer sentiment and the category of your goods, you can make more rationale analyses and better-informed decisions about your network strategy.

No matter how effectively your team manages the vast amount of transportation data in your network, you only see one facet of the market within which you’re operating. An outside partner that utilizes the supply-and-demand dynamics of both shipper and carrier data can help you formulate a plan, optimize network efficiency, and monitor carrier compliance over time. Understanding this data and how it changes day to day will help you find greater effectiveness within your overall strategy.

A big part of navigating uncertain times is having confidence in your decision making, and equipping yourself with this knowledge is a great step forward in building that confidence.

Heather Mueller is chief operating officer of Breakthrough Fuel.

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