While cities and states are slowly reopening, there is still significant uncertainty surrounding the global economy and when we’ll head towards recovery. Shippers are experiencing never-before-seen challenges and, in maneuvering them, realize it’s vital to understand the change in consumer behavior and how it impacts the supply chain.
A recent Consumer Brands’ Association Coronavirus Survey found 68% of Americans are optimistic about the next 6 months and the United States’ ability to reopen the economy. Despite consumer mentality improving, shippers’ concerns on COVID-19’s impact on the supply chain remain top of mind.
While some industries experienced a surge in demand, including healthcare, grocery and consumer packaged goods (CPG), this hasn’t been the case across the board. Some faced a reduction or, in some cases, a complete halt in business. These new challenges and concerns have led shippers to shift their strategies and develop new priorities for the rest of 2020 and beyond.
Shippers’ Top Priorities
As reported in the recent Q2 2020 Coyote Curve Market Forecast, the truckload market has likely already hit the bottom in Q2 at a -9% spot rate, and contract and spot rates should more or less converge from here. Due to the circumstances, the rate environment will most likely be more forgiving than usual, but it will definitely be volatile; and, with rates regularly fluctuating, shippers must keep their key priorities top of mind.
First and foremost, shippers’ top priority is keeping their people safe during this unprecedented time. They’re also focusing on keeping team members productive despite disruption, making necessary strategic shifts in production, managing rapid and frequent shifts in demand, and maintaining operational efficiency.
The priorities for those experiencing an influx of demand are quite different from those seeing a decrease. Shippers in surging markets are focused on supporting frontline employees by ensuring their facilities have necessary crucial safety items like personal protective equipment (PPE), testing kits, and sanitization products.
The industries experiencing a downturn, such as durable goods, have been focused on keeping their businesses operating and their people productive. They’ve had to prioritize repurposing available capacity to streamline operations, while others have turned to private fleets to haul less-than-truckload or full truckload shipments. To support COVID-19 relief efforts, some industries even shifted their production lines completely, like automotive manufacturers producing ventilators or clothing manufacturers making masks and scrubs.
Other shipper priorities include managing increased production output, despite lower processing rates. These lower rates come from new facility regulations mandating safety procedures, social distancing, and fewer employees per shift, resulting in less efficiency. Shippers are also dealing with a less frequent transportation schedule and imbalanced inventory, adding to the struggle of keeping supply chains running smoothly.
A new 2020 for shippers
Regardless of the industry a shipper operates within, the outlook for the remainder of 2020 is much different than originally planned. The entire supply chain realizes the importance of developing new strategies to adhere to the current situation and prepare for future disruptions.
Shipping processes will inevitably change to improve supply chain visibility and automation and update future inventory and warehousing procedures. These new plans and strategies focus less on short-term, cost-based decisions, and more on proactivity, flexibility, and efficiency.
Shippers have rewritten their 2020 plans to address these new priorities. While some tactics have higher initial costs, investing now will allow shippers to better recover from future disruptions. Other new strategies include:
-Collaborating with other shippers to garner insights and best practices
-Creating pop-up fleets at surging origin points
-Focusing productions on the lines making the most, the fastest
-Working with 3PL providers that offer flexible, instant capacity to haul freight
-Moving live-load pick-ups and deliveries into temporary drop trailers
-Reducing number of SKUs to eliminate unnecessary variety
What comes next
Some shippers have found it easy to identify ways to better prepare their businesses for future disruption and have established new processes to do so. However, this doesn’t mean they have avoided uncertainty altogether. Shippers are asking themselves three key questions:
-How do I keep my employees healthy and safe?
-How do I keep my facilities up and running efficiently?
-How do I limit disruption to my supply chain?
Since COVID-19, shippers immediately made shifts to maneuver the unthinkable. Unfortunately, there is no clear answer as to when or how shippers will see less market volatility, and they may even see more complexities in the meantime. This brings additional geographic and industry disparities.
As the economy moves towards recovery, we anticipate a surge in demand and a corresponding increase in volume. Industries, especially those whose shippers slowed down, will have lean inventories and, when demand rises, need to increase production. While shippers’ results may differ from their original 2020 goals, we believe a recovery in consumer demand will be here soon.
Nick Shroeger is the Chief Network Solutions Officer at Coyote, a leading global third-party logistics provider headquartered in Chicago. Since joining the Coyote team in July 2009, Nick has been a key leader in identifying challenges of the supply chain industry and developing and scaling solutions. In his current role, Nick leads Coyote’s research and innovation efforts for both shipper and carrier solutions as well as network connectivity with Coyote’s parent company, UPS.