Banishing Supply Chain Plagues, Part 1: Silos and Spot Quotes

Numerous factors contribute to waste, loss, and supply chain inefficiencies. This is especially true as a supply chain expands from a handful of regional facilities to an interlinked global network, each part burdened with its own local compliance needs. In fact, growth can often reveal the first symptoms of systemic supply chain “plagues” that have festered beneath the surface for years.

Left untreated, these seemingly small problems can add up fast—and may ultimately prove fatal.

The first step to fixing or even preventing supply chain growing pains is identifying the primary causes of inefficiencies and waste. A few common culprits can cause smooth operations to come to a grinding (and expensive) halt—but they can also be banished for good.

The limited view from a siloed supply chain

Managing local operations is critical to the growth of any global organization. Regional specialists can help navigate compliance and protocol issues at locations along a supply chain. However, as an operation becomes more decentralized, the greater risk quickly becomes mounting supply chain inefficiencies due to lack of company-wide visibility.

Silos within a supply chain segment accountability, visibility, and even collaboration across an organization, leaving individual facilities to operate using their own standards and protocols. Compliance and specialization are crucial to continued growth, but they should not come at the expense of visibility across a global supply chain.

The solution to silos is to implement a single, web-based transportation management system (TMS) to track and report on the entire supply chain. When silos are removed, operations and supply chain managers can focus on local shipping and logistics details, while also gaining the ability to “zoom out” and see every load on every route all at once.

Greater visibility allows for more frequent, even habitual diagnosis of supply chain health as a whole, rather than simply dealing with local inefficiencies that have been allowed to progress unchecked.

The long-term problem with spot quotes

Spot quotes can sometimes seem like a great idea. No contract, no hassle, and a rate you can live with to get a quick shipment.

Unfortunately, that isn’t the whole picture. While spot quotes can be an excellent way to get a range when estimating shipping costs, they’re never indicative of the best possible rate. That’s because spot quotes are inherently designed to benefit the carrier, not the shipper.

Even when a “transactional spot quote” (lowest price wins) fulfills shipping needs, it won’t result in the best service, nor will it help build a relationship that can pay dividends down the line. Relying on spot quotes is an expensive way to delay the inevitable but necessary task of negotiating the better rates and service that only come with the right contract.

The main factor behind freight rates is the load-to-truck ratio, meaning spot quotes will change all the time. If truck capacity is low, expect rates to climb. An annual contract shipping rate protects supply chains from these erratic fluctuations—especially when it’s negotiated with enough data to take future rates and trends into account.

Stamp out common supply chain plagues

In an upcoming post, we’ll take a closer look at two more problems that plague countless supply chains—rogue spending and premium freight—and explore how to keep them at bay.

Need help overcoming your biggest supply chain challenges in the meantime? Contact CTSI-Global today for reliable, cost-effective solutions and support.

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