Most industry professionals can agree that supply chains today are more forward thinking than ever in their history. With the right data and analysis, we can forecast more accurately, plan more precisely and create optimally efficient strategies.
But even the best-laid plans can go astray. No amount of insight and analysis could have predicted the unprecedented events we have seen in 2020. Short of clairvoyance, the most data-minded and nimble companies were left with strategies that needed to evolve, pivot, or start over from scratch once the coronavirus pandemic swept supply chains in North America.
For many organizations, these disruptions feel like a threat to their team’s success and bottom lines. It is easy to let the unexpected force your team into triage mode — focusing only on fixing daily, operational issues. To hunker down and ride the tides of the storm waiting for the waters to settle.
But the most effective companies aren’t sitting back and waiting for the storm to pass. They are leveraging these deviations to learn about the weaknesses of their routing guides. They have leapt through the gaps created by a disrupted market to transform their strategy for a more agile future.
When Disruption Strikes
When markets are stable and adhere to your expectations and forecasts, aspects of your strategy that aren’t working in your best interest can fly under the radar. If your freight is still moving, it is easy to overlook misalignments in capacity that often hit the spot market and rack up premiums over time. When only a few lanes fall out of compliance at a time, these extra costs can be hard to spot, and shippers may find themselves content with the convenience of the spot market.
When things appear to be working on the surface, it is easy to become risk averse. This “don’t fix what isn’t broken” mentality can hold you back from elevating a good strategy to become a great one. Sticking to your status quo may feel like you’re preventing unnecessary unrest in your network, but this also eliminates all possibility of improving your operations and creating a competitive advantage.
This year is shaking that mentality to its core. COVID-19, historic OPEC+ crude oil decisions, an economic recession, and a contentious presidential election all present clear challenges for shippers and the purchasing habits of the consumers they serve. These are disruptions that your 2020 plan could not have fully anticipated, and it is pushing organizations to rethink how they navigate the unexpected.
As consumer behavior continues to shift through the ebbs and flows of the pandemic and the impending holiday season, supply chains remain in disarray. Shippers who shied away from attacking these challenges early on are watching their routing guide degrade in real time. Across the industry, the increased costs of spot market and brokerage solutions, decreased service levels for carriers struggling to adapt to changing networks, and imbalances across shipper freight flows cannot continue if the industry hopes to right itself.
Shippers that make the conscious choice to think differently through these strange times are finding innovative ways to solve age-old problems that existed in stable markets but became heightened by the events of 2020. The issues that largely flew under the radar now have a spotlight on them and it’s time for shippers to address them.
Transforming the RFP Approach
In terms of industry transformation, the next wave of change is going to be a revamp of RFP strategies. COVID-19, among other things, has proven that annual, full-network freight RFPs are not always the right solution for a shipper’s network — certainly not when freight flows are disrupted. A good freight procurement strategy that includes ongoing monitoring and lane re-contracting on an as-needed basis reduces a shipper’s reliance on an annual RFP and will stabilize performance.
Annual RFPs may best-serve your network, but they should not be your default option. This shift in mindset may feel like too much change during a trying year for supply-chain professionals. But taking advantage of a time where everything is disrupted to such a dramatic degree will create major opportunities to execute better strategies in the future. The data and solutions to do this exist, but it takes leadership that thinks beyond the challenges of today and a commitment to continuous improvement to seize that opportunity.
It shouldn’t take nationwide disruption to instigate systemic industry change, but when faced with uncertainties like we have experienced in 2020, shippers need to rise to the challenge. Standing by and adhering to last year’s strategy vs. shaking up the traditional way of managing freight could be the difference between sinking or swimming in 2021.
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