Making a Case for Contract Freight Technology & Solutions | Infographic
June 8, 2021
Throughout the pandemic, we saw every aspect of the supply chain rise to navigate the challenges of the time with flexibility. But despite the resilience demonstrated across transportation, the last year and a half have really challenged the way we build and manage freight networks—both in times of crisis and of normalcy.
For years, the annual RFP has been widely criticized by the shipping community for being cumbersome and limited in its ability to navigate the ebbs and flows of the freight landscape. This was proven over and over again, as freight demand surged to meet the needs of consumers and frontline workers. The dramatic swings in volume sent routing guides into disarray. And while transportation practitioners still found a way to move those goods to market, it came at a cost—in both time and resources.
We have seen how routing guides created during an annual RFP do not stand the test of time. We have heard commentary discussing the process’s limitations. But we don’t often hear discussions about how to correct this issue while maintaining the integrity of your underlying cost, service, and capacity goals.
Short Term Solutions, Long Term Effects
There is an inherent imbalance in the way the industry is solving capacity problems. Rather than redesigning a procurement and ongoing management process, the industry has invested a disproportionate amount of time, energy, and money on the spot market and other short-term procurement solutions, like brokers.
Breakthrough data shows that contracted capacity makes up 80% of shipper strategies. We believe they should get 80% of their focus and resources.
While the spot market is helpful and necessary to cover one-off capacity misalignments or predictably volatile freight needs, the industry needs to take a more sustainable approach. Short-term solutions that turn into long-term strategies will become costly.
Why We Are Making a Case to Invest in Contract Capacity Solutions
The occasional capacity misalignment is a cost of doing business, but disruptions that systemically occur over time are costly, no matter how high-tech the spot market has become. When shippers make incremental improvements to their routing guide as opportunities arise, they minimize and potentially eliminate the massive, disruptive, full-network RFP that the industry has become accustomed to while avoiding overexposure to the spot market. More optimized capacity contracts ensure that shippers’ freight needs are met, and carrier networks remain intact over time.
Regardless of what the year to come has in store, the freight market will always be volatile. In 2021, it is time for shippers to make a case for more robust contract freight strategies, which will ultimately lead to more systemic stability for both shippers and carriers. This will reserve the helpful, albeit expensive, spot market for what it does best—servicing last-minute freight needs.