Keeping freight spend under control and maintaining logistics visibility have always been a top priority for supply chain leaders going into peak season. Unfortunately, peak season costs continue to soar. For 2020, peak season costs are likely to shatter records. This is especially true as UPS and FedEx have now announced record-breaking peak surcharges. Regarding the FedEx peak surcharges and according to Commercial Appeal, “customers shipping more than 35,000 packages on average per week during periods in October and November will see charges apply later in the year. Customers who qualify will be notified prior to the effective date.
The amount depends on how much more the customer was shipping compared to what they were from Feb. 3 to March 1. FedEx’s website says residential shipments could see a per-package charge of $1 to $5, depending on how much more the customer is shipping.”
UPS has announced rates of up to $4 for air freight, making a 300% climb above the rate of 0.99 last year. Obviously, higher peak surcharges were already expected across all carriers, but their real-world cost and record-shattering values are adding more pressure to the industry. Unfortunately, these rates have a very real implication. They reflect the actual state of the current market and how shippers are rapidly moving freight into the spot market as shipping capacity grows ever tighter. Even in this unusual circumstance, the use of a transportation management system (TMS) can make a significant difference. And shippers need to understand how.
How to Build the Business Case for Integrated Supply Chain Systems
Why Using One Mode Can Add to Higher Freight Spend
A common problem with rising freight spend lies within the assumption that working with a single mode will help to unlock additional volume discounts. While volume discounts are great, they are practically useless in the age of a spot market. After all, volume discounts are based on contracts, and even mini-bids will have that volume factor. Unfortunately, when brokers and carriers are unable to guarantee capacity, the whole notion of getting those discounts goes out the window. The only solution is to maximize efficiency throughout the transportation network wherever possible. This includes identifying the harbingers of higher costs, including poor shipment visibility, higher cargo insurance damage rates, and more.
Using a TMS That Considers All Modes and Rating Opportunities Lowers Costs
The biggest way a modern TMS can lower costs lies in its ability to look beyond the standard expectations for freight management. Modern TMS users and shippers could leverage an advanced TMS to rate all shipments across all modes, considering extra opportunities to save money and including multi-modal shipping.
For example, parcel shipments could be consolidated into LTL freight, which could then be consolidated into full truckloads. That will naturally involve a deconsolidation process. In addition, any of those individual steps could swap modes at a point in the shipping journey to reduce the total cost for the shipment. As a result, the supply chain can save resources, better allocate assets, and keep overall spend under control. An advanced TMS should enable this functionality. Of course, leveraging a modern system to manage peak season costs should also consider the total landed cost for such freight, not just its upfront quote.
Consider this; supply chains tend to add on accessorial charges and other fees after the fact at a higher degree during times of peak activity. This is expected. Things will go wrong. Demurrage fees may occur, drayage costs could go off the rails. The economy could swing suddenly. And consumer shopping will continue to be subject to outside influences, including the COVID-19 pandemic. That uncertainty means squeezing efficiencies from the beginning is crucial to saving total landed costs.
Additional Opportunities to Reduce Peak Season Costs Through a TMS
Working with an advanced TMS to manage peak season costs also opens the door to other opportunities to maximize efficiency. These include:
- Predictive analytics to determine future freight forecast rates and demand.
- Increased accountability by tracking carrier and third-party provider performance.
- Recognizing the limitations and opportunities to improve shipper-carrier relationships by looking at possible savings from renewed bidding processes when compared to actual costs.
- Working with additional outside companies to handle the creation of new routes to satisfy peak season demand.
- Taking advantage of self-optimizing systems to continuously isolate and address potential disruptions in real-time.
- Using robotics process automation (RPA) to streamline exception management.
- Creating a holistic supply chain strategy that collects and applies data in real time to build more collaboration with supply chain partners.
- Integrates appointment scheduling resources with dock scheduling software and applies such information to reduce the risk of early or late arrivals, thereby lowering total risk of dwell time charges and other accessorials.
Prepare for Freight Rate Uncertainty With a Comprehensive TMS and Supply Chain Partner
Freight rate uncertainty remains the biggest issue when considering peak season costs for 2020. Shippers need to seriously start rethinking their strategies and look to an expert solution, such as the Cerasis Rater, to make a difference and capture the opportunities to reap more profitability through multi-modal capabilities. In addition, GlobalTranz, which acquired Cerasis, can help create a winning strategy to lower peak season costs, and those interested can request a consultation online as well.