Delivery trucks often wait hours for a load. Some backlogs remain so severe that warehouses are forced to store rows of containers in parking lots. It’s not uncommon for shipping containers to sit for days at our largest U.S. ports.
The global supply chain and transportation market are being hit harder than ever before. Freight and logistics experts say we’re in a “peak on top of peak situation” where freight volumes have been exceeded well before they typically hit their high point in Q4. We know COVID-19 accelerated e-commerce trends, and now industry experts say this major shift toward online purchases caused e-commerce volumes to advance seven years since the pandemic started.
Procurement leaders are looking at increased spend in shipping, both freight and parcel, as organizations navigate manufacturer and retailer peak season. Reliable freight shipment for your goods is a vital component of a lean supply chain.
Purchasing teams- you have an opportunity to bring your organization to a new level of efficiency, cost savings and adaptability.
In this three-part series, we’ll get you up to speed on the major challenges freight and logistics stakeholders are facing and how a GPO can help your organization mitigate related risks.
Issues Trending in the Freight Space
Freight can already be a high cost for your organization. Often tough for companies to manage in an ordinary year, shippers are grappling with major challenges, including:
- Reduced Transportation Capacity
- Rising Shipping Costs
- Driver Shortages
Through a group purchasing organization (GPO), you can tap into industry expertise from leading companies in the freight and logistics space.
Kuehne+Nagel Vice President of Sales Operations- LTL eCommerce Kevin Brink says that less-than-truckload (LTL), truckload, ocean, air and rail spaces are allocating limited resources to their most profitable accounts.
Watch as Brink gives more insight into this scenario to help you strategically navigate.
Freight is a seller’s market and it’s more critical than ever to innovate. When departments don’t have an in-depth knowledge of transportation, a GPO can connect you to the subject matter experts that will help you enhance, digitize and transform your freight business.
Challenge: Reduced Transportation Capacity & Skyrocketing Shipping Costs
Packed in Tight
Capacity constraints continue to plague all modes of transportation.
In talking to insiders at OMNIA Partners GPO supplier, TransImpact, Director of Operations Branden Burt says, “as of June at the UPS investor summit, the company mentioned global average daily volumes currently hang around 74M. Capacity in the same sense is around 67M leaving a 7M average package volume shortfall – daily.”
Another issue for supply chains is the continued congestion at major U.S. ports. Shipping containers sit for days as this months-long disruption to international supply chains continues.
Cargo ships in Los Angeles/Long Beach port, 9/10/2021 (Map: MarineTraffic)
Containerized cargo volumes have increased 40 percent compared to last year at our country’s two biggest ports, Los Angeles and Long Beach, according to the Department of Transportation.
To tackle the port congestion, President Biden appointed a new port envoy to the supply chain disruption task force at the end of August.
Sky High Rates
Shipping rates are through the roof, and the Department of Transportation reports that the price of shipping containers has jumped 90 percent since 2019, while carriers have committed to continued surcharges throughout 2021.
How does procurement keep cost controlled with much higher demand on limited networks? By partnering with a GPO, you can seamlessly connect with industry-leading suppliers to lock in your rates.
Challenge: Driver Shortage
You’ve seen reports of the nationwide labor shortage, and the impact of the driver shortage in the trucking industry. There are simply not enough drivers and dock workers to support economic growth.
The American Trucking Association (ATA) recently released new information that the “surging freight economy and carriers’ need for qualified drivers could severely disrupt the supply chain,” says ATA Chief Economist Bob Costello. “The increase in the driver shortage should be a warning to carriers, shippers and policymakers because if conditions don’t change substantively, our industry could be short just over 100,000 drivers in five years and 160,000 drivers in 2028.”
The LTL and truckload driver shortage has resulted in carriers becoming pickier about the type of freight they want to move. Not to mention, the limited flexibility in pickups and loads delayed daily at terminals.
GPO Connects Procurement to Freight Solutions
It’s safe to say right now is the best time to understand and get ahead of the challenges in the freight and logistics market.
As purchasing teams adapt to change and drive competitive advantage at their organizations, learn more about how a GPO can help your procurement strategy.
Connect with our industry-leading suppliers in the freight and logistics space.
Stay tuned for parts two and three of this series as we dive deeper into preparing your organization to handle freight and logistics market chaos.