Why Rising Fuel Prices Should Boost Optimization Efforts
Supply chains are getting more and more expensive. From raw materials to transportation, the price of just about everything is rising. In March, the price of crude oil exceeded $100 a barrel for the first time since 2014.
And we’re already seeing the effects, making it harder to manage today’s biggest supply chain challenges. Barge operators are imposing emergency surcharges on each container to account for rising fuel prices. The Panama Canal Authority has proposed a levy on empty containers returned to Asia to encourage efficiency. In the United States, the Ocean Shipping Reform Act has just passed the House of Representatives, the next step in addressing shipper complaints about excessive detention and demurrage charges.
All of these are signs of an inflection point for you to reevaluate your business plan and optimize your supply chains. A lot of attention and resources are spent on the last mile of the supply chain so that customers have visibility, but we need to put more emphasis on the early stages. This is where most of the complexity lies and where there are cost savings to be made.
The regionalization of production can simplify these steps to a certain extent, but does not solve the increase in the cost of fuel necessary for transport. Organizations need to leverage what they have at their disposal. Instead of only using half the space of a truck, it would be more efficient to co-load and fill the entire trailer to get the most out of that fuel. Each additional pallet of freight or cubic foot on a container represents potential savings.
Data analytics is the key to finding those efficiencies and saving money, but it’s not as simple as it sounds. Here’s how organizations can use the information they have to anticipate what’s to come and optimize their supply chain efforts.
Make sure you have the right data
Supply chain optimization is about having the most accurate data and knowing how to analyze it to create the most efficient processes. Obtaining this data can be a challenge – it’s particularly an issue with ocean freight – but making different parties responsible for their parts can create a clearer picture of the data.
Often this image is confused because a clear division of tasks and movements has created silos. The team responsible for port-to-port transportation is likely different from the team that travels between a port and a distribution center, or the last mile.
The right data can inform a holistic view of the supply chain, and logistics orchestration technology can determine the most efficient way to move freight.
Unfortunately, supply chains are rarely predictable. You may have to make a lot of last-minute decisions after a deadline expires, but data can help you come to a conclusion more easily.
If the data tells you what’s coming and going, you can better determine what’s critical and what can wait. It is common for an organization to ship goods only to sit in a warehouse for months. Having data on your restocking orders and sales can indicate if it is really essential to make this request for air freight.
Optimize assets with flow management
Reviewing delivery times can go a long way in optimizing your shipping processes, especially making the most of containers that seem to be becoming less and less available. The data collected using logistics orchestration technology can give you the best idea of whether you have the right deadlines in your system, so you don’t have to scramble to meet your deadlines and you can have the flexibility to streamline operations.
Too many organizations try to get the capacity to meet demand, but don’t fully utilize all of their equipment and overspend on things like shipping multiple containers. Instead of having to ship three containers, logistics orchestration technology can reveal efficiencies that allow you to ship just two. Data can inform flow management so you can reduce risk by doing more at one origin and enabling flexibility down the road.
This also applies to other assets. Optimization allows us not to overload processes, teams and assets that are already stretched. In turn, we can facilitate as much downstream as possible by consolidating freight orders to reduce touchpoints, storage or additional costs while meeting the last requested delivery date.
It requires a different mindset, but the reward is there. With data, you can create a competitive advantage in the face of rising costs.
Let’s say your average usage is 40%. How much would you save if data-driven decision making could increase that usage by 10%? This has the power to create huge efficiencies for your organization where you use fewer containers, and therefore fewer trucks, reducing elements of your supply chain.
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Recognize the inflection point
The ultimate goal is to bring your products closer to the last mile in the most efficient and cost-effective way possible. This has always been true, but the stakes are higher given the rising costs that nearly every organization faces, as fuel tops every category in the Bureau of Labor Consumer Price Index. United States statistics, up 70% over last year. To optimize your efforts and realize savings opportunities, you need to ask yourself some important business strategy questions when thinking about what’s happening at each stage of your supply chain.
How are your restocking orders doing? How long did your last shipment wait in a fulfillment center before it actually arrived? Putting these data points into context can indicate where you need to optimize your supply chain.
Data analysis is easier with logistics orchestration technology and can create a holistic view of your supply chain to provide a more informed picture than you had before. As fuel prices continue to rise, it’s time to think differently. The new flow management, informed by data, can save money at a time when everything seems more expensive.