Black swans in the supply chain refer to unexpected, unusual disruptions within the supply chain, reports Melanie Nuce of Inbound Logistics. For example, a black swan event may include both the physical damage and ongoing disruption caused by a hurricane and subsequent bottlenecks, so shippers that know how to isolate the causes of poor visibility and areas that are likely to contribute to worsening of black swan events can effectively reduce their chances of coming to fruition. More importantly, the ever-growing need for visibility will have a dramatic effect on preventing black swan events from occurring.
For freight, managing black swan events, like risk mitigation, means finding problems that are on the verge of causing disruption and taking advantage of resources to minimize their impact. Shippers need to know why freight black swans are increasing, how using LTL to intermodal shipping options can reduce their incidence, and a few best practices to keep the use of intermodal from becoming a black swan itself.
Freight Black Swans Are Increasing Due to Several Factors
Managing freight black swans are not about merely ensuring continued access to carriers; it’s about ensuring you have the capacity needed at the best price. With more Full Truckload (FT) carriers turning away shipments in the 5,001 to 10,000 weight band, according to Jeff Berman of Logistics Management, the demand for LTL will increase. As a result, carriers will have less capacity and availability to handle unexpected surges in demand. The gradual approach of the holiday shopping season will exacerbate the problem, further tightening capacity. At the same time, Hurricane Season yet again disrupted freight lanes, and demand on e-commerce is still breaking the record books causing massive shifts in tactics and strategies by shippers. Tariffs and the threat of a trade war will also drive overseas’ companies to re-evaluate business practices and shift standard ocean shipment to other ports and lanes. For shippers, this means finding a way to handle changes in inventory and replenishment, as well as managing outbound freight and reverse logistics.
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LTL to Intermodal Shipping Can Pinpoint Higher Spend and Drive It Into Retreat
One of the best ways to ease fears of supply chain and freight black swan disruptions is to expand the current carrier network. Shippers should work with multiple carriers and tap into the value of both LTL and intermodal shipping too. A few key considerations when deciding between LTL and intermodal transportation, include:
- Intermodal is comparable to FT use. The average shipment for intermodal rail is similar in size to FT, but intermodal may be able to combine multiple LTL shipments to offer lower rates for long hauls. Of course, switching between FT and LTL is also a form of intermodal, so FT rates may still be factored into costs of using intermodal shipping.
- Domestic intermodal has both peak and slow seasons. Intermodal also experiences peaks and lulls throughout the year, with the highest times being the holiday shopping season. Shippers should not wait until the middle of the peak season to forge relationships with intermodal shipping carriers.
- Not all providers have the same capabilities. Intermodal can also increase the amount of work necessary to get shipments ready. LTL shipments may need consolidation and deconsolidation to move freight, and not all providers will have this capability. Shippers need to know what additional services will need sourcing to take advantage of the range of LTL to intermodal shipping.
- Transit times are longer than just transportation time. Going back to consolidation and service, transit times for intermodal can be up to a day longer beyond typical transit times for other modes, especially FT and LTL.
Best Practices to Manage LTL to Intermodal Shipping Costs
Although intermodal can help LTL shippers handle sudden surges in volume, there will be periods when it is better to stick with LTL. More importantly, shippers that do use a combined approach should follow a few best practices to optimize the use of LTL and intermodal:
- Make sure documentation is completed correctly. Correct documentation reduces delays and helps reduce accessorial charges.
- Use pallets when pieces fit within the “walls.” Palletizing LTL shipments to fit within the invisible walls of the pallet-cube is essential to ensuring the right rates, especially in place of the rise of DIM pricing in LTL.
- Understand freight classes and bands. While standards exist for freight classes and bands, not every carrier goes by the same rating practice. Shippers should review freight classes with each carrier when selecting between LTL and intermodal.
- Know LTL pricing factors, including minimums, distance, base rates, weight, freight all kinds and accessorial charges. Many factors affect LTL pricing, and the same is true in intermodal. As LTL rates increase, intermodal rates may fluctuate as well. Shippers that take the time to review freight rate factors and service can ensure shipments arrive on time and without unexpected costs.
- Use technology. Technology to increase supply chain visibility is essential to mitigating losses during a black swan event, and it can be leveraged to help locate available capacity too. For instance, using a TMS can tap into the value of regional LTL carriers and low-volume shipping times to get the best rate possible.
The Big Picture
Freight spend black swans can be difficult to spot until they cause significant disruption and impact your profitability. Shippers should take steps now to prevent supply chain black swans by expanding options to range from LTL to intermodal shipping, while also knowing the risks that may exist in intermodal shipping. The use of intermodal will likely increase as more shippers look for ways to circumvent the driver shortage and the capacity crunch. Stop putting off the conversation, and start thinking about how switching some freight from LTL to intermodal and vice versa could help your organization prevent disruptions due to unforeseen circumstances.