3PLs offer shippers ‘untapped capacity’

3PLs offer shippers ‘untapped capacity’

As the second half of 2018 unfolds, shippers are presented with compounding challenges as the holiday season approaches. The truck driver shortage is showing no signs of loosening, lower tax rates have fueled consumer spending, and the tariffs imposed on Chinese goods are spurring manufacturers to stock up on imports in order to get ahead of the presumed price increases, all of which are driving truckload capacity constraints.

In the recent American Shipper article, “3PLs offer shippers ‘untapped capacity’”, Maggie Turner, National Account Manager at AFN, delves into the complexities of the market and shares insight on how shippers can successfully navigate this uncharted territory. Turner discusses how shippers have found new ways to make themselves a ‘shipper of choice’ and tap into available capacity by working with a trusted 3PL to gain access to smaller carriers.

Please read the article to find out more.

 

To learn how AFN can help you access untapped capacity, contact our supply chain professionals today.

“Truckers’ toll: Delayed deliveries, higher prices forecast as industry struggles with driver shortage”

 

The shortage of truck drivers is no longer an issue that is relevant only to those directly involved in the logistics and supply chain industry. In fact, as transportation costs rise and are increasingly passed on to consumers, the driver shortage and the resulting capacity constraints are becoming “a nationwide topic of conversation,” says Matt Witten, carrier sales manager at AFN.

In this recent article from The Daily Herald, Matt shares his thoughts on how shippers are rethinking “how their supply chains are constructed” and why many are turning to 3PLs for solutions.

 

Photo credit: MarkWelsh@dailyherald.com

Mastering the Complexities of the Cold Chain

Mastering the Complexities of the Cold Chain

A “new normal” for the transportation industry is here, and supply chain leaders are increasingly seeing how the retail landscape is changing- especially for the cold chain. What has caused this “new normal”? If you’ve ever ordered a frozen pizza online or a meal kit recently, you have part of the answer.

Changing consumer demands shifting weather patterns, record breaking load-to-truck ratios, and implementation of government regulations are all factors. Where does this leave retail and logistics leaders, and how must supply chains adapt to these changes? Rachal Snider of AFN and Alan Reed of Chicagoland Food & Beverage Network dive deep into the complexities of the cold chain- and shed light on how shippers can master the new normal of today’s retail landscape with the right partners.

Read Rachal and Alan’s full article in Food Logistics to get the full scoop. 

 

If you have any questions regarding the cold chain or current market conditions, please feel free to reach out to AFN at info@afnww.com.

 

5 Big Questions Facing Retail and Logistics Leaders

5 Big Questions Facing Retail and Logistics Leaders

How can I be a shipper of choice? How can my company navigate increasingly complex retail compliance requirements and mitigate the risk of noncompliance? And will this crazy transportation market ever cool off?

Throughout the first half of 2018, the transportation market has consistently seen record-setting load-to-truck ratios and spot rates- and it isn’t looking to slow down anytime soon. Evolving consumer demands and competition from online retailers are changing the landscape for brick-and-mortar retailers and the 3PLs and carriers that manage their transportation needs. In her recent article in Total Retail, Rachal Snider, AFN’s vice president of customer supply chain, shares insights and answers to the “5 Big Questions Facing Retail and Logistics Leaders.”

Time for a mini bid already?

Time for a mini bid already?

It’s more than fair to say that we are officially in the thick of another busy freight season! RFP roll-outs are now being implemented and/or executed, and carriers and brokerages alike are navigating through their resources to ensure coverage of their commitments. It’s as simple as that…right?  

Not necessarily! Eerily similar to the same period in 2017- though perhaps less a shock to the system- the disparity in the supply of drivers and trucks relative to demand for those resources continues to create hardship for shippers. While individual shipper experiences will always vary, even the most meticulously drawn-up plans may already be showing some cracks, as evidenced by poor Acceptance and Service rates.  

How can this be happening so soon? Why can’t assets and brokerages simply uphold agreements they created only one to two months ago? AFN does not aim to explain today why assets and brokerages become active contributors to these shortcomings. However, we have noticed a number of shippers have implemented an interesting solution to their procurement woes.  

In recent weeks, AFN has seen any number of shippers put out “Flex,” “Mini,” or “Gap” bids/RFPs. We don’t typically see this kind of activity this early in the year. Various reasons have been presented for these procurement events, but ultimately what has happened is that these shippers have recognized gaps early on in the life of their carrier agreements. Our team sees a number of potential benefits to shippers of conducting these off-cycle procurement exercises:

  • Rather than waiting for the absolute height of the freight market, shippers are taking advantage of a remaining- yet shrinking- window to fill gaps with somewhat normalized rate agreements.  
  • Shippers who traditionally resort to daily “Portal” or “Freight Auction” options that can be a nightmare to transportation budgets, are bolstering their networks with stronger agreements – although perhaps more expensive than expected in the original bid – to limit “spot” activity.  
  • Shippers are recognizing carrier and brokerage partners who have done a nice job early on, and deserve the opportunity to drive further partnership.  

The idea of implementing yet another RFP can be an unpleasant thought. But many shippers have decided that the payoff is there, especially if you keep the scope small and focused, include only a few key providers, and move quickly!

AFN would be more than happy to discuss potential solutions to the current challenges in the market at your convenience. Please contact our team of supply chain professionals at info@afnww.com.

 

Walmart Tightens OTIF Requirements: Strategies for Shippers

A recent article in the Wall Street Journal revealed that Walmart executives plan to announce a further tightening of their on-time, in-full (OTIF) policy to go into effect in April 2018. Whereas the previous requirement called for larger suppliers to deliver within a one- or two-day window 75% of the time or be assessed a fine of 3% of the cost of the goods in the shipment, the new requirement raises the target to 85%. Smaller suppliers will see their compliance target rise from 33% to 50%. OTIF targets vary by department, and some of AFN’s clients have seen higher OTIF requirements (as high as 95%) go into effect already.

As AFN has shared previously, these OTIF requirements apply not only to late deliveries, but to early deliveries as well: any deliveries outside the stipulated window are penalized. Some shippers have been surprised to learn that Walmart also charges non-compliance fines for collect freight that they route on behalf of the shipper.

In a transportation environment flush with capacity, these requirements would represent a challenge to shippers and their transportation providers. However, in today’s current market, characterized by historically high load-to-truck ratios, the issue becomes more acute. It is precisely because of those current capacity constraints that, perhaps counter-intuitively, early shipments have emerged as the more serious potential stumbling block for shippers.

It all boils down to load balancing. For example, a shipper may be expecting to deliver five full truckloads into a specific Walmart location in a given week. Walmart, however, may order all five truckloads to deliver on a single day. Now, a carrier that could handle five truckloads in a week is being asked to deliver all five in the same day, which can create a capacity challenge. As a result, some carriers will attempt to spread the capacity needs by picking up their loads early, however, this can lead to drivers arriving early to their Walmart appointment. This scenario runs the risk of the load being noncompliant and subject to costly fines, as Walmart will allow for, and then penalize, early deliveries.

Given their nationwide presence and scale, Walmart is often a shipper’s largest customer. Therefore, even a slight increase in demand versus forecast could mean substantial incremental volume. Building out contingency plans for waterfall capacity alternatives or overflow volume could save a shipper substantial dollars instead of having to utilize the spot market in tight timelines.

That being said, load balancing and planning only addresses the “On-Time” part of the OTIF policy. It is also critical for shippers to understand how the “On-Time” and “In-Full” requirements are intertwined. For example, while the On-Time equation is binary (i.e., a shipment is either on-time or it’s not), the fill rate metric can be partial. As a result, as the compliance window tightens, shippers are incentivized to “cut and ship” rather than waiting for production lines to complete lagging runs, or for inbound deployment loads to arrive. It may also require expediting of raw materials or inbound loads in order to ensure subsequent shipments to Walmart are on-time compliant, which can inflate overall logistics costs even as compliance fines are mitigated.

How can shippers mitigate the risk and improve their on-time, in-full delivery?
  • Plan capacity needs on a daily and weekly basis: While challenging, working with your 3PL or carriers to anticipate future capacity needs and to develop contingency plans for volume surges can help you stay one step ahead of the game.
  • Increase communication with your 3PL and/or carriers: The forward planning mentioned above is only possible when there is a free flow of communication between shippers and their 3PL and/or carriers. Shippers should be proactive and transparent in communicating their priorities and challenges so their providers can be better positioned to help.
  • Seek out expert help: At the risk of stating the obvious, one of the best approaches for shippers that are being challenged by the new OTIF requirements is to work with a 3PL that has intimate knowledge of the OTIF policies, relationships with experienced and vetted carriers, and access to Walmart’s scheduling tools. In addition, 3PLs can provide access to technology that delivers critical business insights.
  • Keep your eye on the clock: Ensure that drivers have adequate HOS in the event that they arrive early for a delivery and must wait until the appointed delivery window to open.
  • Recalibrate the trade-off between cost and service: As OTIF compliance becomes more stringent, and the risk of fines increases, it doesn’t make sense to seek out rock-bottom truckload rates from subpar providers only to cough up the savings (and potentially much more) in the form of chargebacks. Instead, work with your 3PL to increase your on-time/in-full delivery, avoid the fines, and in the process, improve your relationship with Walmart.

To learn more about shipping successfully into Walmart, please download our white paper.

Thieves Don’t Take A Holiday

Thieves target cargo during the holidays because the volume of and demand for desirable goods increases. CargoNet recently released the infographic below, which shares winter holiday theft trends from 2012-2016.

Of particular interest are the following points:

  1. Of the 199 reported cargo theft incidents, the top targeted commodity was Food and Beverage. Because these commodities are shipped in high volumes, they’re susceptible to opportunistic thefts.  Additionally, because these products are often less secured, harder to track, easier to sell, and (once consumed) leave less evidence than their more traditional high-value cousins (e.g., consumer electronics, alcohol), they can become the focus of more sophisticated thieves.  Shippers of all commodities should rely on transportation providers with strong compliance programs, which are more likely to avoid thieves of all kinds, including those which might optimize their risk-reward in favor of select food and beverage commodities.
  2. The average loss value of $136,222 should cause all shippers to reassess their exposure– particularly those shippers which don’t currently employ security measures. When balanced against the probability-weighted cost of the lost goods, the added time and expense required to initiate and conclude the claims process, the negative brand impact of disappointed consumers, and the risk of losing customers to competing brands because products are not on-shelf, the expense of cargo security might still be a wise investment.  A good transportation provider can help you effectively weigh those costs.
  3. CargoNet rightly cautions against tendering loads to carriers willing to take undesirable loads at rates below industry standards. In the current market, characterized by capacity constraints and rising rates, a carrier that is willing to move any load at below-market rates should set off alarm bells.  Again, good transportation providers are skilled at ferreting-out deals that seem too good to be true.
  4. Minimizing the amount of time that a trailer is left unattended is crucial.  Thefts occur when drivers are away from trailers; it is important from a freight shipper’s perspective to set transit schedules that are sensible and do not require trucks to sit for extended periods of time.  Advising carriers not to leave trucks unattended for more than short and necessary breaks can only help.
  5. “Fictitious pickups” also increase during the holiday season.  Experienced and careful logistics companies employ methods to ensure that the people to whom loads are tendered and rate confirmation sheets are sent are who they say they are.  Best practices include calling the phone numbers and using the email addresses that are listed on the FMCSA website for the hired carrier.  Sometimes, loads are stolen when a shipper gives the freight to a cargo thief disguised as a legitimate trucking company.

Please see the infographic for a wealth of tips and best practices. To learn more about how AFN can create a customized high value/high risk cargo security solution that aligns with your goals, please contact us today.

 

Insights For Your 2018 Transportation Strategy

Current transportation costs have been holding at multi-year highs – a trend that can be expected to continue well into 2018.  For most manufacturers, distributors and retailers, transportation costs represent the largest component of the logistics cost segment.  Per Logistics Management’s Annual Study of Logistics and Transportation Trends, freight transportation costs alone can represent 2 to 3% of total revenue for large ($10B+) companies, and 10 to 11% of total revenue for smaller (<$250M) companies.

While the ups and downs of the transportation market are beyond your control, there are steps you can take to rein in your spend and ensure that you are getting the service you are paying for.  For example, shippers with over-budget and/or under performing supply chains typically share one or more of the following characteristics:

  • Lack of a knowledgeable transportation manager
  • Internal market rate benchmarking is over one year old
  • Not utilizing a transportation management software (TMS)
  • Little to no visibility into fuel surcharges or accessorial costs
  • No KPI scorecard management

In addition to direct transportation spending, proper oversight of other logistics-related costs can be just as impactful to the bottom-line.  These include warehousing/distribution center optimization, inventory and storage management, personnel/resourcing efficiency and financial payable/receivable cycles, etc.

In addition to the changes you can make within your own organization, your level of collaboration with your 3PLs and carriers is an important factor in the success of your overall transportation strategy.

Specific Transportation Procurement Strategies

There is no question that most shippers and producers are feeling the pinch of higher transportation costs, especially over the past five months.  The broad market conditions responsible for driving record high spot rates for van, flatbed and reefer loads are expected to continue through at least Q2 next year.  The new ELD mandate will play a large part in prolonging tight truckload capacity – even further reducing available market capacity.

ELD discretionary, non-compliance citations can be expected beginning after the Dec. 18, 2017 deadline, while the 10-hour ‘out-of-service’ order associated with ELD non-compliance will begin Apr. 1, 2018.  Expect additional tightening and rate pressures leading up to, and immediately after the Apr. 1st deadline.

Cost implications of a higher rate environment can be mitigated through the following initiatives:

  • Carrier diversification to extend capacity and mitigate risk on priority shipments
  • Clear prioritization of freight scheduling (i.e., primary shipments vs. spot shipments) and communication of these priorities to 3PLs and carriers
  • Balancing the value of higher-priced carrier options against the risk of non-compliance fines by receivers and/or stock-outs
  • Utilizing a 3PL for customized capacity solutions and longer-term dedicated options

Other Levers for Your Supply Chain Cost Strategy

Time is money.  Reducing bottlenecks that cause delays within your supply chain can be just as impactful as reducing transportation shipping rates.  Real delays in your network can increase working capital costs, lost sales, spoilage, etc.  Those same delays also drive higher soft costs related to warehousing inefficiencies, rescheduling work and decreased customer service.

The benefits of lower costs fall directly to the bottom line and can significantly improve profitability.  All segments of your supply chain network need to be actively managed to minimize delays and ensure operating efficiency.  

Opportunities to lower other supply chain costs can include:

  • Alignment of scheduling operations and warehouse picks with product flow patterns
  • Employing mode optimization (truckload, intermodal, LTL) to optimize cost per unit/pound
  • Improving forecasting techniques to align production/distribution to customer demands
  • Implementing automation and real-time tracking capabilities to minimize manual intervention
  • Improving collaboration and communication with key stakeholders and service providers

Ultimately, cost decisions should be balanced against the importance of maintaining critical customer relationships, through the efficient delivery of goods when and where they are needed.  The underlying truckload market will remain tight as we head into 2018 and will be exacerbated by any additional, unexpected disruptions such as weather events.  Now is the time for a detailed assessment of your current logistics strategy.  Start working with your internal stakeholders and external service providers to ensure you are best positioned to optimize the balance of customer service and cost, in a changing and volatile market.

To find out how AFN can help balance service and cost in your 2018 transportation strategy, please contact us at info@afnww.com.

 

Short-Term Truckload Rate Outlook: Nov – Dec

Truckload Capacity & Rate Expectations

During the first week of November, spot market rates increased and capacity constricted, signaling tangible evidence that we are in the retail holiday season ‘red zone’.  Per DAT Solutions, van and reefer spot rates increased week-over-week by 2.0% and 2.2%, respectively.  The recent week increase is a reversal of the rate moderation trend we have seen over the past three weeks.

Going forward, we expect tighter truck capacity and upward pressure on rates through mid-December.  Key factors behind the estimate:

Seasonality:

Demand on trucking resources typically increases leading up to the Thanksgiving Day holiday.  After the post-Thanksgiving weekend lull, demand picks up again through mid-December.  Because rates tend to rise more quickly than they fall, intra-week fluctuations in capacity do not necessarily translate into immediate reductions in truckload rates.  Retail season rates have staying power.

Strong Retail Forecast:

The National Retail Federation (NRF) expects 2017 holiday sales to increase between 3.6% – 4% vs. 2016.  Retailers and parcel delivery companies also project a record shopping season this year.  In addition to general pressures on trucking capacity, the strong growth in e-commerce will translate into smaller, more frequent shipments spread over a broader timeframe.  Rate increases will be more likely to hold through the duration of the retail holiday season.  The e-commerce effect will be greater than last year.

Current Market Dynamics:

The ongoing driver shortage, electronic logging device (ELD) regulations, heavy construction demand and recent hurricane disasters are all playing together to wreak havoc on overall trucking capacity.  These market dynamics will play out over many months.  Domestic oil production, which requires huge demands on trucking assets, continues at near record levels.  The recent hurricanes, though in the rear-view mirror for many, are still impacting areas in Texas and Florida.  In fact, many families in the most devastated hurricane-impacted regions are still living in motels and tents near their destroyed homes.  Post-hurricane reconstruction will continue well into 2018.  These market drivers will extend beyond the 2017 retail holiday season.

National weekly spot rates: Van, Flatbed, Reefer from 10/14 - 11/04

Source: DAT Solutions

 

Diesel Fuel Price Expectations

During the first week of November, the US average on-highway diesel prices increased 2.23% from the previous week to $2.88/gal.  This level is 41 cents (16.26%) higher than one year ago.  All PADD regions experienced week-over-week price increases.  The West Coast region had the largest increase, rising 7% to $3.33/gal – California specifically, jumped 11% to $3.54/gal. (for more information on the recent diesel tax increase in California, please see here). Current indicators suggest greater upward pressure on retail diesel prices than previous forecasts.  Key market factors include:

Distillate Inventories:

Current distillate inventories are running well under seasonal averages as we head into the oil heating season.  Near-term supply stocks will be built with higher-priced crude feedstocks, driving higher retail prices over the coming weeks.

Current Market Dynamics:

New Middle-East tensions and strong demand have pushed current crude oil contract prices near 28-month highs.  However, US and global crude oil inventories remain high, which will limit contract price moves higher in the near-term.  The recent run-up in crude prices will hold the floor on diesel prices through December.

Please contact info@afnww.com with any questions.

 

Potential Impacts of the California Diesel Tax Increase

A recently passed piece of legislation which raises diesel fuel taxes is going into effect tomorrow in California. What impact will it have on carriers and shippers?

As of November, 1, 2017, the California Road Repair and Accountability Act of 2017 imposes these increases within the State:

  • The excise tax for diesel fuel increases 20 cents (from 16 to 36 cents per gallon).
  • The additional sales tax for diesel fuel will increase from 1.75% to 5.75%, on top of the average base sales tax of 8.44%.

Because this law will increase carriers’ operating costs, shippers should consider the potential impact to their transportation budgets for the remainder of 2017 and for 2018.  Likely, those moving freight mostly in California will be disproportionately affected. But, because the California hike will affect the national fuel scale, all will be forced to grapple with its effects.  

Whether shipper or carrier, your specific geographic freight mix will likely dictate the overall impact.  That is, a shipper or carrier with more intra-California, outbound, and inbound California freight will probably be more affected.  

Some, however, are hoping that it will all balance out in the end.  For example, we have learned that at least one national retailer has informed carriers of their intention to not accept higher fuel surcharges for California freight on the assumption that costs there will be offset (or more) by benefits elsewhere (where an increase to the national fuel scale will outpace costs in other states, allowing carriers to recoup costs or profit on the whole).  Yet, this assumes a uniformity that probably doesn’t exist, in either, or both, the shipper and carrier network.  We expect shippers and carriers to find some friction as each tries to account for this inefficient distribution of costs and benefits.

As with any new legislation, “time will tell” the true impact of this tax increase. For now, please do not hesitate to reach out to us at AFN at info@afnww.com.