As 2018 goes down in history as one of the most volatile years in recent memory, transportation professionals are attempting to catch their breath, knowing that while they may have been given a pass for 2018, 2019 will not be as forgiving.
Freight is here to stay
We have heard stories of larger shippers citing rising freight costs as a reason for not meeting their earnings forecast. In fact, 148 S&P500 companies mentioned “freight,” “shipping” or “trucking” on their earnings calls. Many CEOs are reaching out attempting to finally understand what all this “freight stuff” means to their company and their bottom line. For those companies who view freight as simply a cost of doing business, a severe paradigm shift is in order.
Now that freight has entered the boardroom, transportation professionals need to ensure that transportation gets and keeps a seat at the table, as well as speaking to C-level management in terms they understand about how transportation can be a driver of customer satisfaction and increased profitability.
Ask the right questions
To do that, a few questions need to be answered. First: Does the company have a written transportation management plan? Secondly: Is the company willing to bust internal silos that are preventing dialogue required to address transportation issues? Thirdly: What must happen to get C-level engagement to view the allocation of resources to transportation as a critical priority? And, finally: Is the company willing to ask for help?
When we look at ever increasing customer requirements, transportation can no longer be treated as an afterthought. Freight will impact a company’s operations and profitability. Any changes in service level capabilities will impact inventory and procurement models. How do decisions made here impact transportation costs? Does transportation have a seat at the table when determining this impact?
At the recent CSCMP Edge conference, Derek Leathers, CEO of Werner Enterprises said, “Rates have gone up, costs didn’t have to.” He mentioned that most shippers can strip 5 percent or more out of their shipping operations by reviewing their processes and practices. The bottom line is shippers need to become more strategic, as opposed to transactional, in conducting their transportation operations.
Become a strategic shipper
I believe one of the most important changes to how shippers approach transportation is how they procure transportation services. Transportation is not like purchasing standard items. “Transportation is the only commodity that combines a high-value asset — a truck — with a person,” said the CFO of a major carrier.
It is not like buying a stapler — and to treat it as such is preventing companies from seeing the complete transportation picture.
Companies who can commit to becoming a strategic shipper will be able to get preferential treatment to mitigate rate increases and greater access to capacity. As this will only continue into 2019, now is the time to reverse the business as usual approach to transportation.