The Supply Chain Industry Feels The Pressures Of The Capacity Crunch

The supply chain has proven to be the competitive battleground of the future, and the organizations that start planning for unavoidable disasters now, will be able to live to tell the tale when the storm passes.

Mnet 194507 Risk Management
Jeff PottsJeff Potts

People have been talking about the capacity crunch for a while. Is it coming? Is it a myth? How bad will it be? Well, it’s here and it’s not a myth. Weather-related events and other inevitable tragedies have taken an already tight market and applied a vice grip to it.

Cloudy Skies Ahead

At different times, numerous ports such as those in Savannah, Tampa, and Miami have all had to suspend operations due to storm-related activity in 2017. Others, like the Port of Charleston, closed for an entire day, while ships were forcibly rerouted. This added further stress in port cities and regional hubs and resulted in higher rates between carriers and brokers everywhere, with further restrictions put upon on an already stretched supply chain industry.

The industry had to respond to several natural disasters — hurricanes, wildfires, floods — that led to closed ports and roadblocks across Georgia, Florida, Texas, and California. While recovery efforts continued across these states, the aftermath was felt across the entire U.S., and put further strain on truck capacity and supply chain resources.

Further Government Mandates

In addition to the recent weather-related events that have caused volatility to transportation rates and capacity, government-mandated Electronic Logging Devices (ELD) for commercial trucks are also having a significant impact. The soft enforcement went into effect in December 2017, where non-compliant carriers are fined for not meeting the ELD requirements. Hard enforcement begins as of April 1, 2018, when non-compliant carriers and drivers will be placed out of service for violating the ELD rules. The total impact of how the ELD mandate will ultimately affect both transportation rates as well as capacity is still unknown. Many analysts believe it could have a four- to seven-percent impact on capacity and a five- to 15-percent impact on carrier rates.

Joining a Supply Chain Network

If an organization is still operating on a static, closed, on-premise transportation solution, they have no flexibility to adapt to sudden disasters and mandates such as the ELD. These systems truly limit an organization’s ability to react to changing conditions. The first step to overcome this difficulty is to join a network. The power of a network lies in its ability to bring clarity and certainty to a volatile situation, while offering “on-demand” connections to thousands of potential carriers. Forming connections, streamlining processes, and identifying new capacity can be accomplished faster than ever, while joining the right network will provide the following benefits and strengthen an organization’s supply chain solution:

  • A global capabilityThe use of a more resilient network will allow a business to sell across borders and trade zones like it’s right next door. Systems can be updated easily as new custom requirements are put into effect.
  • Value flexibility above the certainty of the status quo Supply chain managers cannot afford to sit still with static supply chains and think they’re prepared. Those that make the extra effort to prepare for multiple scenarios will be able to satisfy their customers in times of trouble.
  • Provide supply/demand insight Market data combined with a deep network can help secure the best rates and protect an organization’s budget. For example, with a global-trade-network view of the market, Logistics as a Service (LaaS) customers have the potential to keep rates lower than with a limited view of providers.
  • Seek best-practice solutions These solutions provide the capability to capture and identify successful new processes, ideas, and technologies so they can be learned and implemented based on proven results. Once identified, they can be learned and implemented faster than the competition.

Regrettably, there is no magic bullet to overcome the difficulties of the capacity crunch. The best thing to do is to begin making plans for improvement by implementing a flexible, adaptable supply chain solution that will position an organization for success. The supply chain has proven to be the competitive battleground of the future, and the organizations that start planning for unavoidable disasters now, will be able to live to tell the tale when the storm passes.

Jeff Potts is Vice President of Client Services at BluJay Solutions.

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