Disruption across the supply chain continues to increase costs for shippers. In fact, disruption looms all around us which has forced many shippers to think creatively about how and where to cut expenses. “More than ever, logistics budgets are constrained, which is forcing shippers to find out-of-the-box ways to cut costs,” said Michael Paul, VP of Sales at Sleek Technologies. “One area where innovative shippers have quickly reduced spend is transportation, specifically full truckload (FTL) cost.”
The recent spike in warehousing cost is a result of higher demand for storage space, along with increased labor costs. Looking at Q2 2022, less than 4% of warehouse space sat empty, which is a 27-year low. Rent cost increased by 10%+ in 2022, compared to 2021. And reports have stated that 2023 will see an increase of 8.8%. Therefore, shippers should plan for more disruptions at the ports, and more inventory sitting in containers as it waits for warehouse space. The inventory ratio will continue to rise, which means increased costs related to demurrage and detention for ocean boxes. When goods are finally ready to be transported to an available warehouse/distribution center, shippers will need to react quickly by securing compliant, over-the-road capacity.
Warehousing is not the only factor related to increased supply chain cost. The Railroad Workers Union is predicting more disruption. Although Congress halted the railroad workers’ strike a few months back, major pain points still exist such as staff shortages, long hours, and lack of paid sick days. If some or all of the 60,000 railroad union members go on strike, nearly 30% of the nation’s freight would come to a complete stop. This means over-the-road capacity will need to pick up the slack, which could equate to roughly 467,000 additional over-the-road orders per day. As with the warehousing disruption, rail disruption would have a major impact on freight procurement and cause truckload capacity to be oversold and imbalanced.
Mitigate Rising Logistics Costs
Innovative shippers have turned to technology to reduce logistics costs. AI-powered software has advanced how shippers are finding, vetting, and transacting with over-the-road capacity, especially when contracted carriers are not available. Using pre-configured attributes, AI matches uncovered loads with compliant carriers in seconds- not hours. When shippers have instant access to a pool of compliant carriers, they are better positioned to deliver goods on time, while paying a fair market price.
So what are you doing to mitigate supply chain disruption? What are you doing to manage rising supply chain costs? One of the quickest, easiest ways to rescue cost is by automating your freight procurement process. Many shippers have already reduced over-the-road transportation expenses by up to 20%. Don’t get caught flat-footed and pivot to a dynamic truckload procurement solution. Schedule a quick software demo today!