An Agile Supply Chain May Begin with Fuel Management

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In today’s rapidly evolving transportation landscape, developing an agile supply chain framework will lend itself to the most successful strategies in 2020. The catalyst for this mindset is the abundance of data being cataloged and generated across the supply chain. With that data comes the ability to quickly identify and adapt to changes in your network. 

What is Supply Chain Agility?

The concept of agility in your transportation and supply chain operations can be defined as your ability to quickly adapt to changes in the shipping environment, consumer demand, passing regulations, and changes to your network. 

Key agile supply chain characteristics include flexibility, responsiveness, and competence. As your people and processes amend themselves to shifts in the greater transportation landscape, competence must be weighed of equal importance. 

The importance of agile supply chain strategies will remain relevant moving through 2020. To maintain a competitive advantage amidst the complexities of today’s business environment, it is imperative for the industry to adopt solutions that make every aspect of their supply chain more data-driven, market-sensitive, and digitally transformative.

What is the Difference Between Lean and Agile Supply Chain Management?

Whereas the agile supply chain concept measures how nimble, flexible, and adaptive your strategy can be, a lean supply chain eliminates waste and inefficiencies wherever possible. The goals of a lean supply chain are to improve bottom-line costs, streamline operations, and minimize excess spend and resources. 

Often, achieving supply chain agility will lead to lean principles, and vice versa, although agility is far more timely. Regardless of which concept your strategy adheres to, systemically committing your teams and operations to that mindset – from supply chain partners to internal teams, to warehousing operations and beyond – will reap the best results. 

What Agile Supply Chain Benefits Can My Organization Achieve? 

The benefits of agility in your transportation operations include:

 

  • Reduced long-term costs as you amend your processes, expenditure, and operations through evolving markets. When you are nimble, you prepare your organization for these adaptations before they are necessary. 
  • Less effort needs to be put forth to mitigate challenges because your network is poised to anticipate them, leading to greater efficiencies. 
  • Your team can increase speed to a final resolution for challenges and changes instigated by the market, eliminating downtime and maximizing outputs. 

 

How to Achieve Agility in Supply Chain Beyond the Basics?

Creating agile strategies for supply chains is not a new idea, and many organizations today build their processes to account for a greater degree of change in a shorter window of time. But the true competitive advantage comes from finding opportunities to align that agile mentality to less-common areas of your network. 

One of the most significant cost components of your most agile transportation and supply chain strategies is going unmanaged and undervalued. That aspect makes up between 20 and 30 percent of your overall transportation spend and is currently creating significant distortion in your budgeting processes. 

How Can You Elevate the Agility of Your Supply Chain Strategy? Transportation fuel management. 

Fuel is one of the only line items in your transportation strategy where inaccurate reimbursement is a widely accepted best practice. Using index-based fuel reimbursement programs–like a traditional fuel surcharge schedule that leverages the DOE diesel fuel index–distorts the true cost of fuel in your network. 

To bring your fuel management strategy into alignment with the rest of your supply chain you should seek accurate, market-based fuel reimbursements. Fuel Recovery is the only fuel reimbursement program in the industry that is shipment-specific and updated daily. Using near-real-time fueling station data from across North America, Fuel Recovery brings accuracy and transparency to an otherwise distorted practice that puts unnecessary costs into shippers’ supply chains.

This accuracy ultimately eliminates excess costs and creates a fair and accurate pass-through expense for both shippers and carriers, that is as agile and responsive as the market. 

Read more about the value of accurate and transparent fuel management here.

Three Elements of an Agile Fuel Management Strategy

Flexibility:

With the right fuel management strategy, you can set parameters that capture all of the unique aspects of your network. From fuel efficiencies to mode variability, to your base rates, each element has associated cost implications. As your carrier networks ebb and flow over time, you have the ability to use data to inform how these cost levers evolve which keeps your fuel management roadmap flexible. 

Fuel Recovery offers a flexible framework that can be adapted to the goals and priorities of your organization. This makes long-term planning easier to adjust so that your strategy can grow with your network and the marketplace. 

Responsiveness:

Because transportation fuel, namely diesel, is a crude-based commodity, its price can vary dramatically from moment to moment. Traditional cost mechanisms, like an index-based fuel reimbursement program, are unable to account for rapid changes in the market. 

Geopolitical events, regulatory changes, and global economic fluctuations that affect supply and demand balances can drive volatility into fuel prices. A fuel management program like Fuel Recovery enables shippers to respond to these fluctuations in a data-driven way. 

Unlike the DOE Diesel Fuel Price Index weekly update commonly used by shippers, Fuel Recovery accounts for even the smallest of daily fluctuations, so you never overpay (or underpay) for the fuel used to move your goods to market. Fuel becomes a pass-through expense so you can focus on service requirements in your carrier relationships.

Competence:

When you introduce more flexible analyses, tracking, and measuring in your supply chain operations, you need to consider whether you introduced too much variable risk. As your organization continually drills deeper into your network’s data, you introduce new, insightful complexity into your operations. 

When, if ever, do these new considerations and insights become cumbersome to the efficiency of your daily operations? Is there ever “too much of a good thing” when it comes to data? Underlying your ever-evolving transportation and supply chain strategy must remain one true characteristic: competence.

Effective transportation strategies are accurate and comprehensive. They are proven, and they withstand the test of time and circumstantial anomaly—anything from economic collapses to catastrophic weather events, or radical policy changes. 

Despite dynamically changing industry standards and volatile market disruptions, Fuel Recovery remains constant by removing distortion and bringing accuracy and fairness to carrier relationships as they pertain to fuel. As your fuel management strategy evolves and grows, your ability to use that data to generate optimization opportunities and make better strategic decisions increases. 

Regardless of circumstance, your transportation strategy will benefit from more accurate and transparent fuel management strategies and the simplicity that our complex database enables.

Agility Starts with Transparency

To remain at the forefront of any industry, taking a pulse of current best practices and goals for 2020 and beyond is imperative. Moving into a new decade, agility will continue to be the name of the game, and ushering in intelligent solutions to every aspect of your supply chain will create a greater competitive advantage for your organization. 

Fuel is an often-overlooked aspect of transportation spends, but when managed properly with a market-based approach it can uncover opportunities to elevate your entire supply chain.