Are we there yet? The high-tech future of supply chain management is often discussed, without having actually happened yet. In the meantime, shippers and carriers are moving through a transitional phase. Supply chain functions of the past are melding with the ones of tomorrow – man and machinery learning to work with computers and big data. Here’s what we do know about supply chain trends as they’re set to unfold in 2016, with a little speculation put towards what lies beyond.
Companies shipping LTL freight know all too well about the driver shortage of the last 18 months or so, and the similar lack of multimodal equipment to get the job done reliably. The debate rages as to whether it’s a true shortage or an artificial one. Real or not, this limited capacity on the part of carriers has resulted in LTL shippers paying higher rates to get their freight to its destination.
This rate hike is absorbed by the shipper, as well as the customer, who then demands increased reliability and service in exchange for the increased costs of doing business. Companies shipping products have been placed in a tight spot but are increasingly choosing to fight back.
State of the Supply Chain
Now that rising freight costs have become a serious business concern and common across carriers, companies relying on LTL shipping are driven to put a greater emphasis on the qualities of a carrier rather than the rock-bottom costs. Consistency in transit time and equipment availability, coupled with an ability to be flexible, all functioning on multimodal capabilities, is what is brings shippers to a carrier.
What this means for 2016
The wheels have been turning for some time, but 2016 looks to be the year when supply chain function becomes predominantly digital. Again, we want to emphasize how discussing the future of supply chain trends is a little tricky considering it hasn’t happened yet. With that said, safe assumptions can be made about what shippers and carriers will be doing over the next 300 days and beyond.
Companies stubborn and talented enough to handle carriers all on their own are probably going to have to reconsider their position this year. Establishing relationships with logistics service providers will most certainly be necessary in order to navigate through the current explosion of carrier options.
Shippers will also have to depend more on dedicated transportation services in 2016. This is due primarily to the surging demand for reliable and stable delivery circuits in the face of rising freight costs.
Gainsharing between suppliers and retailers is seeing a resurgence as a result of the increase in carrier rates. This is where revenues are spread between the two to cover the unstable nature of supply and demand, particularly within the rental sector.
Another supply chain trend gaining traction in 2016 is the open book policy. This is an agreement between associated parties to view data and financial information from anywhere along the supply chain. Previously, this arrangement was difficult to achieve due to inherent advantages for retailers. However, software is enabling companies to share critical information while also maintaining confidentiality over the details.
Implications for 2016 and Beyond
Demand for the service of reliable carriers is up, but the supply of drivers and transportation is apparently down. Assuming this is now the new normal for the supply chain, and the industry embraces digital tech as expected, the future looks surprisingly bright. Rates may have increased, but the result has been an evolved preference for carrier quality over who can give the lowest quote. Striking a fine line between quality and price will always be the mission of shippers in search of carriers, but the former clearly holds sway over the latter going into 2016 and beyond.