Traditionally, shippers have a reasonably consistent and planned repetitive supply chain, complete with a set of upper and lower control limits for their inventory levels. But with the current dilemma, shippers are becoming cautious and are likely to order a lot more inventory than they would have liked—thanks to the uncertainty with freight lead times. This has led to an environment where volumes are going up faster than usual, which when set against strained available capacity, creates a perfect storm.
Supply chains in the auto industry have engineered a logistics network that is precise and consistent year over year. Unlike other markets, the auto industry can meticulously plan out their annual requirements well in advance based on the number of vehicles they plan to push through their production line in a given time frame. Nonetheless, auto supply chains have been badly hit this year due to a semiconductor chip crisis that forced OEMs to shut production for several weeks in the first half of 2021.
Inventory planning is much harder in the retail industry, as consumer demand is clearly more volatile.
Inventory planning is much harder in the retail industry as consumer demand is clearly more volatile. While demand can be reasonably forecasted based on historical trends, they are never as precise as auto supply chains. Shippers in the retail business are holding the belief that static load planning tools cannot help build resilience against volatility.
Dynamic load planning tools look to understand freight movement not at the shipment level but rather at the order level—going one level upstream for improved planning. With visibility at the order level, loads across all individual (and smaller) purchase orders can be consolidated and moved over fewer trucks, thereby saving money for the shipper.
Increasing Cost To Serve Pushes Shippers To The Corner
The tight capacity market has resulted in a critical shortage of truckload capacity, pushing shippers to split their loads and move them via LTL. The LTL market also witnesses a crunch from the e-commerce and small parcel segment that traditionally move through this mode. This, combined with the volume overflow from other modalities, has made the LTL segment difficult to operate in, mirroring the prevailing situation throughout the industry.