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A recent market consultant panel, hosted by PARCEL FORUM '21, "How to Best Use Transportation Consultants," revealed tremendous insight into the state of the market and how companies are leveraging such technology to reduce costs. The panel brought together experts in parcel shipping management, including Intelligent Audit CEO Hannah Testani. Here are her top thoughts on the market from the panel featuring video snippets from the panel.
https://player.vimeo.com/video/647843333?h=a23ff341a5
Despite the challenges of limited capacity, the changes allowing carriers to increase rates have a residual history of informational asymmetry. Shippers have a limited view of the market, whereas carriers know everything. That imbalance will stimulate a shift in the market that will create new parcel carriers beyond UPS and FedEx. At the same time, new gig economy solutions for parcel, like Veho and AxleHire, will help turn the market toward shippers.
That same shift will further trigger an infusion of regional parcel carriers and help create a more robust market that will leverage parcel and LTL to stay competitive. Such consolidation continues through mergers and acquisitions too, including the Lasership acquisition of OnTrack to extend parcel capacity. In turn, shippers will have access to capacity on their own and can go where the rates are more indicative of actual market conditions. The trick is simply getting to that point.
Amazon is the 500-pound elephant in the room. Before the pandemic, Amazon was already moving shipments for high-volume companies. Unfortunately, Amazon is not a shipping company but a tech company. The sweet spot for Amazon is data aggregation and creating new revenue streams through the application of that data. From one-way NDAs to a nearly biased view of which freight is a higher priority, Amazon may not be the best choice for short-term capacity. Yes, Amazon may have the capacity, but the rates may fall by the wayside when Amazon needs to prioritize Amazon's freight, meaning your capacity will quickly grow scarce.
Shippers need to start thinking about the best approach to help their companies find the best solution when looking for a consultant. For example, Intelligent Audit takes a freight invoicing technology-focused approach to finding new capacity and revenue opportunities. That's different from other providers or 3PLs. Considering the unique way each consultant helps your business grow is essential. This reduces total shipping costs and ensures outcomes best align with corporate objectives.
All companies want to decrease costs, but they may not know where those cost reductions are possible. If shippers do not accurately know their internal vitals, it isn't easy to figure out where to target cost reductions. That lends itself to using data from a company like Intelligent Audit to make day-to-day decisions and achieve more substantial reductions through meaningful improvements.
The decision to work with a consultant must begin with understanding where savings are possible. Regardless of the shipper's needs, the whole premise starts with visibility. Shippers need to know their data and how they can transform that raw data into actionable intelligence. Shippers have their own data. By working with an expert, shippers gain insights into how their internal data compare to external sources. Shippers also derive value through consultants' view of what competitors are doing and providing an advisory role to show where new opportunities for savings exist and how to stay competitive. In other words, shippers leverage industry knowledge with advanced analytics to implement best practices across all modes.
It's not solely about parcels either. When one mode—for example, ocean—falls by the wayside, it's about turning to other modes and knowing how to make the best use of such modes to account for short-term disruptions. Those options, however, depend on knowing current costs and expectations. Shippers can then utilize historical data to create what-if scenarios to accurately quantify the impact of your decisions before you make them, and turning those insights into action.
Intelligent Audit believes capacity will begin to loosen in the months after the Chinese New Year. The best view is seen through the ocean freight companies working with Intelligent Audit. Yes, carrier rates are at all-time highs, and contracts have a built-in premium right now. Still, shippers are renewing contracts to find capacity. Those higher costs come with guaranteed capacity. That's the distinction that shippers need to understand.
Capacity, even higher-cost capacity, is still capacity. And consumer demands are increasing in tandem. As a result, shippers can get capacity through the post-Chinese New Year by simply signing contracts now. Other options can still help when the market rebalances, such as new RFPs and mini-bids to alleviate the strains of high-cost capacity. Of course, that also assumes no new disruptions creating more demands for capacity too.
It all starts with planning and developing a carrier focused-strategy that will help mitigate rate increases. Shippers need to invest in their supply chains right now. Many shippers may lack the systems necessary to achieve savings, such as leveraging a TMS, WMS, or OMS. Unfortunately, shippers without a robust tech stack are setting themselves up for failure. Even while peak season is upon the industry, it's never too late to invest wisely.
Shippers that invest now will be better-suited to accommodate changes in the market through future price hikes and peak seasons. Investing today creates a cushion for disruption, and that enables operational efficiency through data-backed management.
The shortage of drayage continues to make planning inventory difficult, especially in the run-up to Christmas. The simple reality is shippers need to get their merchandise. Depending on the type of shipper, such as clothing versus Christmas inventory, the shipping type will vary. Those with an absolute need for inventory will go by air.
For example, fashion retailers will go by air to get inventory faster.
Now specifically targeting drayage, Amazon has also made some changes to its driver policies. Such changes will likely lead to more drivers going to Amazon, but still, the key is knowing when each carrier makes the most sense. That means shippers need data. Part of that includes incentivizing workers beyond basic wage increases.
For example, some shippers are conducting raffles for new electronics.
Shippers need to do what's necessary to keep employees happy and account for changing industry conditions that might create tighter capacity.
We rely on our own technology to create nimble onboarding processes. That allows our company to track data and recommend the right solutions and services for each shipper. Intelligent Audit works together to ensure shippers know what's needed and how to properly use their systems to avoid exceptions and disruptions. Intelligent Audit is, therefore, continuously staying ahead of new technologies and services by ensuring our systems can seamlessly integrate with and apply data from those different solutions and providers.
The impact on the parcel markets is two-fold. On the one hand, it means shippers will have a lower need for parcel than meets the eye. After all, leveraging in-store fulfillment, particularly buying online, pick-up in store, is the primary advantage shippers have over Amazon. Customers get their packages faster, and shippers can reduce total costs by simply leveraging their storefronts as a fulfillment or distribution center. That alleviates the concerns over carrier costs and capacity too. Of course, it all depends on managing inventory and keeping things balanced, as noted earlier.
Secondly, leveraging the stores themselves gives improved use of other modes that stores can handle more efficiently, such as LTL and FT, to move freight at better rates without incurring higher costs due to more e-commerce orders. Together, brick-and-mortar retailers can stay competitive with Amazon and achieve the same goals of reducing total shipping spend and lessening the burden on the industry's parcel carriers. Yes, the demand will remain. However, it will play into the diversification that will precipitate new parcel startups, much like Veho and AxleHire, and stimulate the flow of supply and demand to help rebalance the market.
The supply chain is in a state of flux, and everyone is clamoring over costs, capacity, and change. Still, all disruptions have a solution, and it's up to each shipper to know what's needed to overcome such disruptions. That's where working with an expert that understands the market, a true consultant that can help your team find the best path forward, adds the most value. Connect with Intelligent Audit to get started today.
Set up a call with one of our experts to discuss how Intelligent Audit can help your business uncover opportunities for cost reduction and supply chain improvements through automated freight audit and recovery, business intelligence and analytics, contract optimization, and more.
