Logistics and Supply Chain Strategies for 2023
January 23, 2023 •Kevin Baxter
While the logistics and supply chain environment finds itself in a much different place at the start of 2023 than it was a year ago, many strategies for success remain similar. After perusing the 2023 trends and keeping abreast of the rules of engagement, following some key logistics and supply chain strategies for 2023 can help companies handle the certainties and uncertainties of freight in the coming year.
What Are Some Strategies to Address Logistics and Supply Chain Trends in 2023?
Hold Off on Contract Rates
While it may feel most comfortable to lock in a contract rate for the year as soon as possible, in the current marketplace which has spot rates at their likely low point for the year, shippers can benefit from holding off a bit before committing. Take advantage of the lower spot rates to keep shipping costs down in the first quarter of the year, then look to lock in a 12 month rate in the March-April timeframe, before produce season begins. That way you - and your partners - will have time to see where the bottom is set in terms of freight rates, and you can benefit from those lower costs while they last in the short-term. Then, with freight rates anticipated to climb as the year goes on (with an expected normal pattern), you can similarly benefit from the cost and capacity certainty of a 12 month, contract rate agreement.
Freight and logistics is a relationship industry for those seeking long-term success. Constantly churning through providers means that when the chips are down, businesses may be left with no one to turn to for a reliable solution. Instead, they'll constantly be stuck "chasing freight." And even as there are some legitimate reasons to shop around for price right now as capacity abounds and spot rates are down, maintaining contacts and partnerships comes in handy to be prepared for the next shift. To that end, just last year, this was our number one strategy as well in a much different pandemic peak environment. One reason that stands no matter what the shipping situation? Companies realize supply chain excellence drives a competitive advantage that can be leveraged in a variety of ways.
Long-term, trusted partnerships allow all parties to maintain an understanding of market conditions, continue to maximize services and reduce costs and drive value over the long haul. Again, there may be some good reasons from time to time (like now, for instance) to do some price shopping, but those longer term partners tend to take the edge off of the biggest spikes for shippers as well, so completely abandoning such a relationship could leave shippers pennywise, but pound foolish.
For those shippers that don't feel like they have those couple of trusted partners, we have a simple test that can help when it comes to logistics providers. Just ask for five or more examples of the company walking away from a prospective arrangement because they knew their company wasn’t the best fit. If the provider can't do that, it's probably ok to move on. Why? It means the freight and logistics provider can recognize when an opportunity isn't the right fit for what they have to offer, and they're willing to turn away potential business because they wouldn't feel right accepting a job that someone else is better suited for. This shows self-awareness and can help shippers rest assured that the provider would hold their evaluation of your potential partnership to the same standard.
And this partnership model goes both ways. For those on the provider or carrier side, keeping the customer relationship strong is perhaps more important now than ever before. The shoe is on the other foot from last year, when shippers were fighting for limited capacity. Now it's carriers and providers fighting for shippers' business, as companies benefit from rate wars due to plenty of capacity. That means that once you get a shipper in the door, knock them out with your excellent service, visibility, transparency, communication and overall customer-centric approach, and you'll be the one they come back to when they're ready to make the longer term commitment.
Maintain Flexibility & Agility
Flexibility & agility is key to any logistics & supply chain strategy. It can sound counterintuitive, but planning ahead makes things easier in this regard as well. That means contingency plans for political, labor, natural disaster, pandemic, cybersecurity, and other impacts. Just in the past year, we've seen labor unrest nearly result in a railroad strike, continued negotiations affecting west coast ports (along with uncertainty over AB5 enforcement), a major hurricane ravage parts of Florida and Russia invade Ukraine, to name a few. Flexibility and agility means being ready for the next challenge, whether it's an offshoot of something we just noted, or another one, like the potential UPS strike.
Some have already taken such a thought to heart, as with the mentioned uncertainty around the West Coast ports (plus the already hard learned lesson from last year's port backup), many importers have already shifted to other ports or made other adjustments to their supply chains. This is the essence of successful supply chain management to avoid preventable disruptions.
Long-term, trusted partnerships can make any pivots simpler, provided there’s open, ongoing communication. If you don’t have a long-term trusted partnership, or there are limitations with what your freight or logistics provider can offer, consider:
- Shortening RFP cycles when needed
- Expanding your list of freight providers
- Example would be to add 53’ domestic intermodal options to augment truckload, before you need them to lock in a contract rather than playing the spot market
- Pay close attention to regionals, niche and any providers that offer alternative capacity solutions
- Bring in alternative freight modes to offset any shortcomings one mode may have at any time
- Diversifying and creating redundancies in your supplier base across countries to limit the impact of political or natural disasters - note the nearshoring trend for example
A lesson many shippers have learned over the volatile times of the last couple of years was investing their time and energy into supply chain planning – with a flexible and agile mindset – was not a cost, but a competitive advantage. The best companies already operated this way.
ECommerce & Omnichannel
Even in a year that saw inflation lead to many predictions of doom and gloom for retail as the holiday season approached, eCommerce was unaffected. In fact, shoppers spent a record $211.7 billion on eCommerce in November and December, up 3.5% from the year prior. So shippers who've exhibited any continued resistance adjusting their brick-and-mortar supply chain strategy clearly need to get with the program, or risk extinction.
The key is not to tack eCommerce and omnichannel distribution on to the brick-and-mortar strategy, though. Rather, companies should manage them separately as their own integral part of a distribution strategy - as the 2022 holiday season made clear, it may take over in many cases anyway.
Transportation management systems continue to get upgrades to help with omnichannel, optimizing orders and improving visibility and transparency in order fulfillment. Systems not only operate the business, but also help ensure a company uses all available distribution options to get the product to the customer in the most efficient manner.
Logistics & Supply Chain Technology Upgrades
Many companies understandably were so busy getting through day to day shipping demands over the two-year pandemic-related peak, that they didn't have time for much else. Those who made time to integrate technology to improve their processes, though, reaped the benefits. The good news for those who didn't, with the freight industry taking a breather at the beginning of 2023, there's no better time to make upgrades to the latest logistics and supply chain technology to optimize their operations. Many companies involved in either side of the shipping equation found themselves especially profitable the last couple of years, so using some of those profits to invest in the operations side with continually improving technology just makes sense. And it'll more than pay for itself in the improvements it brings as well as the fact that a business will be more prepared for the next freight market disruption.
The simplest way to integrate technology into your freight and logistics operation is to take advantage of the best software as a service (SaaS) TMS systems of today. These allow shippers customization for their business requirements while still taking advantage of the supply chain systems' unique niches within a transaction set within a supply chain. Because of the cloud, just about any size company can implement best in breed supply chain systems at a reasonable cost, and they can still tailor them to their business requirements whether they're a company of 2 or 200. The top tier TMS systems have already established API connections into their system to allow shippers and logistics to build the best of breed TMS quickly and easily. For example, the MercuryGate cloud TMS has over 50 such integrations already in place, with more added every year. Rather than building and maintaining a proprietary system and "frankensteining" in the connectivity, it's already there - and even easier when using a trusted partner who's done much of the customization for you. Of course, another advantage is maintenance, as a proprietary system can be cumbersome, find itself out of date rather quickly, and even become unusable if the architects of the system leave the company.
While the TMS should be considered the cornerstone of any logistics technology implementation, another related piece is automating tasks. Companies are moving from supply chains to supply networks. The difference is, supply chains imply a one-to-one linkage where one step needs to be completed before the next step can be taken, while supply networks imply a many-to-many relationship where multiple inputs and outputs can be managed at one time. But automating daily tasks is key to allowing for quicker throughput and acceleration of product movement from start to finish. With some of the day-to-day grind automated, logistics pros can focus on the bigger picture of reducing costs and improving overall supply chain network effectiveness.
Technology also helps companies outsource more of their logistics and supply chain work. Why do this?
- You realize a company’s supply chain can be a competitive advantage
- The cost of keeping up with technology, relationships, market knowledge and talent is too expensive to do internally
- With the previous in mind, you want to focus all resources on your products/services
- Volatility in the in the freight market is best managed via a variable cost outsourced freight management service solution
So that technology, then? SaaS - as mentioned above - and SCaaS (supply-chain-as-a-service) are two concepts to grab hold of to assist in moving forward quickly and on a variable cost basis.
Cloud-based SaaS transportation management software (TMS) systems are the best option for companies of all sizes to take their supply chain from a cost center to competitive advantage for those who want to manage the supply chain within their four walls.
For those companies that want to focus on what they do best and leave the transactional supply chain work to those that have created strong business doing it for others, SCaaS is the better option. The SCaaS approach has been a long time practice of large companies where companies outsource their logistics functions. But as technology has improved, more competitive pricing has made the SCaaS solution an excellent option for those mid-sized shippers looking to supercharge their supply chain quickly.
On top of that, part of any SaaS or SCaaS solution is the control tower concept. Much like an airport control tower reviews, manages and directs flights, a company can take a similar approach to logistics and supply chain activities with a supply chain control.
A supply chain control is an agile cloud platform that focuses on providing end-to-end supply chain visibility and control. By integrating and extending existing enterprise resource planning (ERP), warehouse management systems (WMS), and TMS systems with suppliers, manufacturers, 3PLs, and other partners, a supply chain control provides actionable, granular visibility and operational control across the entire supply chain. This optimizes efficiency, service, and cost.
Don't Forget Data
Data is of course an important Star Trek character and should be remembered as such, but in this case, logistics & supply chain data is the information to value. The old way of logging transactions in Excel and calling it a day - or the even older way of putting everything on paper in a file cabinet - is simply not good enough in today’s complex landscape. In other words, the more data, the better.
Shippers must collect data by shipment and – at a minimum – gather:
- Date of Scheduled and Actual Pick-Up and Delivery
- Pallet count
- Tariff Use
- Cost Broken Down By: Linehaul, Fuel, Accessorial
- Charge-Back Amount & Reason
- Origin and Destination Zip Codes
- Freight Moved Via Contract or Spot Contract
- Special Circumstances
- Lead Time Order Was Given to Freight Department to Move the Freight
Back to that remembering data thing, it's also vital to remember what to do with it, as in:
- The data must be collected digitally.
- The data must exist in a system that allows users to easily analyze it in a way that creates executable decision points.
- The data must be shared without an individual’s interpretation.
- The data must be analyzed against company performance and benchmarked against market data coming out of the massive freight consortiums.
That last point deserves an underline. Companies that start each year budgeting for freight and logistics need to have market intelligence, and need to use it. A common mistake is benchmarking against internal information – as in, “we did this last year, and it was our best year, so let’s do it the same way again.” That’s nothing more than measuring against a personal best target. You won’t know if your best is anywhere near the best though, unless you measure against the competition – i.e. the market.
And with all this technology and data going around, we'd be remiss if we didn't remind you to heavily value cybersecurity. Otherwise, a successful cyber attack could mean there's nothing left of your business.
Customers are more likely to be repeat customers if they know the company they’re dealing with cares about the environment. That’s why sustainability in the logistics & supply chain areas is a vital consideration. And it’s something that can be done. Supply chain sustainability is a topic for anyone connected to freight and logistics, from freight providers to warehouse operators.
On the freight side, shippers need to search out those motor carriers, freight brokers and logistics service providers that are registered with the EPA SmartWay Program. The purpose of the EPA’s SmartWay program is to help companies advance supply chain sustainability by measuring, benchmarking, and improving freight transportation efficiency. The program is set in place to monitor, measure and improve their carbon footprint and environmental impact of their business through various tools provided by the EPA.
Shippers can be a part of the EPA SmartWay program also.
When it comes to warehousing operations, sustainable considerations include:
- Lighting that reduces electricity demand
- Eco-friendly packaging
- Products made with sustainable components
- Freight is moved through the most eco-friendly option while still meeting delivery requirements
Conclusions on Logistics and Supply Chain Strategies
Implementing successful logistics and supply chain strategies in 2023 requires commitment and a willingness to learn and adjust to an always evolving landscape. An open mind is a necessity in making supply chain decisions as always, and while the environment is different than the last couple of years, many decisions will still be challenging and/or uncomfortable. But once implemented, the right decisions can bring tremendous upside.
As you move through 2023, we'd encourage you to keep us in mind here at InTek Freight & Logistics. We can help with many of the solutions listed above, and we’d love to be a part of your company’s logistics & supply chain discussion. Just drop us a line, and we'll follow up quickly to go over your specific needs and help you find the right solutions.
For more about how our team can help, browse our site and visit our Resources Page, to see what we have to offer, and learn more about freight & logistics.