Developing an effective supply chain strategy is an increasingly complex task. From new technologies and changing regulations to the volatile fuel market and other seemingly unpredictable elements, shippers have numerous factors to consider.
That’s why many organizations are adopting principles of an agile supply chain strategy. Whereas the concept of a lean supply chain focuses mostly on removing inefficiencies to reduce costs, agility includes the ability to be flexible and adapt to change in an effective manner.
Jenny Vander Zanden, Breakthrough Vice President of Fuel Recovery, works with her team to help clients develop strategic roadmaps that align with specific transportation goals. We spoke with her to find out how a different approach to fuel management supports an agile supply chain.
“As market dynamics change, and shippers make choices, Breakthrough can help them identify the most effective ways to move products to market, regardless of what happens in the marketplace,” Vander Zanden says.
Boiled down to the basics, an agile supply chain focuses on three major aspects: controlling costs, improving efficiency, and increasing speed. Here’s how a better approach to fuel management benefits each of those factors.
Three Ways Fuel Recovery Supports an Agile Supply Chain
Paying a fair and accurate fuel reimbursement is usually the first thing on the minds of new Breakthrough clients.
“As shippers move from an index-based program into market-based fuel management, their initial goals are to gain transparency and align the true cost of fuel with their transportation budgets,” Vander Zanden says.
Yet, that’s only the first part of how a Fuel Recovery program benefits shippers. Your team also works to identify advantageous mode conversions, such as switching from truckload to intermodal when it presents an opportunity to cut costs and remove emissions from the supply chain.
“When fuel prices change in the market, Breakthrough’s platform allows our clients to have visibility when the scales tip towards intermodal over strictly truckload as the more cost-effective opportunity,” says Vander Zanden. She adds that moving to an intermodal shipping strategy typically reduces transportation fuel costs by 50 percent making it an ideal method to bring agility and flexibility to cost management in a rising fuel market.
Since overall fuel costs tend to make up 20-30 percent of the cost of moving goods to market, the ability to better manage fuel expenditures will make a significant difference. Read a case study about how one of our clients saved 34 percent on fuel in one year.
A key goal of an agile supply chain strategy is efficiently responding to change in volatile markets. Geopolitical events, natural disasters, policy and regulatory environments, and the overarching economics of the fuel market can impact prices with little warning.
Vander Zanden explains how switching to a market-based approach not only helps shippers gain price transparency, it also leads to improved efficiency.
“What ends up happenings is, as unforeseen events occur, there’s an element of increased productivity that creates value for our clients,” she says.
Vander Zanden uses changes in state fuel taxes as an example. In 2017, a notable diesel fuel tax increase came from California, which had an impact on many supply chains. Carriers were sending letters to shippers looking to discuss changes to fuel surcharge rate structures.
For shippers with a large network of carriers, that can create a lot of additional work, but it’s much simpler when you have the right partner.
“With a Fuel Recovery program, there’s no longer a need to discuss rate changes with individual carriers in response to an event like this,” Vander Zanden explains. “Our clients don’t have to go through all the processes required to make adjustments. There’s no need to manage dialogue with a large network of carriers. When California increased taxes, our clients knew their carriers would be kept whole on every movement, every day, exactly in alignment with the market.”
Without all the extra communication and work to manage, transportation executives and their teams can focus resources on more important tasks.
This kind of efficiency not only helps shippers when fuel prices rise, it also ensures transparency when the market dips. That responsiveness supports both a streamlined approach and reduced costs.
“The challenge is, carriers will be very unlikely to go to shippers asking for less money because costs dropped,” says Vander Zanden. “So, Breakthrough not only supports agile responses to price spikes from unforeseen events, it also gives shippers the advantage of real, transparent fuel costs when prices fall. We remove the distortion that can make shippers vulnerable.”
In addition to being flexible, an agile supply chain must be able to respond quickly, adjusting to disruptions as well as fluctuations in supply and demand. Breakthrough takes this idea a step further. Vander Zanden believes shippers need to be smarter as well as faster.
“’Smarter’ means they’re not responding, they’re being proactive and participating with the knowledge that the market is volatile,” she says.
While others react to changes in the market, truly agile shippers are often expecting that change and already have a strategy to address it. What better way to improve speed than to stay ahead of the game? That’s why Breakthrough arms clients with resources and guidance to anticipate what’s coming down the pipeline in the fuel market.
Our monthly Breakthrough publication provides a closer look at market trends and offers forecasts to aid in planning. We look at key commodities relevant to our clients’ transportation network and help predict changes in the marketplace so that they can account for fluctuations in their yearly budgets. We mitigate uncertainty in this aspect, so that there are minimal surprises to budgets based on market indicators.
The benefit of working with an industry expert like Breakthrough®Fuel is the way we help shippers make the right decisions and make them quickly. That allows your supply chain to become more efficient, which leads to cost savings.
Become an Agile “Change Navigator”
The organizations that work with us share our core belief in embracing and implementing positive change. Our clients are leaders, not followers. We call that having a “change navigator mentality,” which is a concept from Richard McKnight’s book Victim, Survivor or Navigator: Choosing a Response to Workplace Change.
Agility requires the willingness to be a navigator. If that sounds like the direction you and your organization are heading, Breakthrough will be the right fit. Learn more about our fuel management solutions and how real-time transportation data is helping shippers become more agile.