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Peak season 2021 is on track to be yet another stretch of uncertainty. Shippers need a strong forecast built on the integrity of data to make optimal decisions. The right data, cleansed for accuracy and normalized for analytics, can make the difference between understanding what to expect or experiencing the adversity of service failures and upset customers. Here are five things shippers need to know to drive throughout the 2021 peak season.
Capacity is still the name of the game in logistics. Jeff Berman of Logistics Management said, "coming off of more than 15 months of activity across myriad modes and verticals that has been far from typical, due to the pandemic, many stakeholders make the argument that there has been a permanent Peak Season." Those words echo the unrelenting pressures on the industry. The economic recovery of 2021 appears to be adding to that level of complexity and pressure too. When it comes to capacity, there's a general bottleneck affecting all forms of transportation. Berman continued:
"As for the impact of Peak Season on day-to-day operations, 51% of survey respondents described it as very significant, 43% called it somewhat significant, and 3% and 2% said it had no impact or was not very significant, respectively. And 74% of survey respondents noted that Peak Season had an impact on day-to-day operations, with the remaining 26% saying it did not, and 68% think this year's Peak Seasons will have more of a normal feel to it."
That means increased activity will inevitably lead to greater demands on the industry; without a single source of truth for transportation data, finding shipping capacity will be difficult at best.
The traditional tender lead time needs to change. It's not enough to simply tender based on usual peak season conditions or plan inventory management and fulfillment based on prior years' data. The 2021 peak season needs an extension to tender lead time well beyond what anyone imagined. Hurricane season is also playing a role. According to Shefali Kapadia of Supply Chain Dive, the lead time for the production materials rolled to 88 days in June. Lead time for electronic components rose to more than 52 weeks — a nod to the global semiconductor shortage. These slower deliveries and extended lead times amount to a few insights for the 2021 peak season:
The state of the transportation market is experiencing an infusion of tenders. That is driving rates well past records. National spot load rates have risen 11.3% compared to July 2020. That combines with a 37.2% increase in fuel costs. Together, it's easier to see transportation costs on an upward trend for the remainder of the year. Increased costs mean shippers face the threat of paying more, but it's only paying for what they actually use that can have a meaningful impact.
What does that really mean for current processes though?
Take a moment to consider a simple truth. The overwhelming majority of carrier invoices contain some discrepancies or errors. Rather than assuming all invoices are accurate, shippers need a clear strategy for auditing all invoices. Using automated rulesets, shippers can determine how carriers are performing from a financial standpoint. That includes knowing spend by carrier, error rates, and transportation spend by mode. Taking that information in context helps shippers know when to diversify their networks, apply KPIs to justify new bidding processes, and think about alternate fulfillment models, such as zone skipping or hub injection.
It begins with leveraging a single source of truth for data management to track performance across all possible windows and understand true carrier cost performance. That's an integral part of any data analytics strategy. The implication for shippers is simple: leverage automated business intelligence tools to manage by exception or fall by the wayside throughout the 2021 peak season. A centralized strategy to data-driven transportation management can reduce the workload of in-house procurement managers, lessening your labor costs and allowing your team to focus on what really matters — customer service.
Everything in logistics tracks back to a balance between supply and demand. Demand for more transportation, more product, faster service, and accountability will inevitably write the story of the 2021 peak season. Inflation continues, and the increased cost of goods sold due to rising transportation costs will force shippers to rethink their fulfillment strategies. They must also rethink what they are willing to accept in terms of cost.
Will shippers continue to offer free, fast shipping, or will they put the control in the hands of customers by allowing them to choose fast shipping at a premium. Both options amount to a way to reduce the overhead costs by shifting them closer to the customer. There's another option that can be hiding in plain sight. Rather than trying to offset costs with higher product pricing and passing costs along to consumers, shippers should retake control over their data, normalize and apply it to ensure their carrier base is as diverse as possible. They need to recognize that costs are going to keep increasing, and they must take steps now to avoid unchecked spending and confusion in e-commerce fulfillment strategies as peak season approaches.
The best strategy for staying ready for the 2021 peak season depends on data. Data is meaningless in its raw form, but cleansed, applied shipping data gives rise to actionable insights to help your supply chain team know what's happening, why spend is increasing and what other options may be available to reduce your risk. Contact Intelligent Audit to learn more about how your team can put the power of data-driven insights to work 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.
