The coronavirus outbreak has left the logistics industry in a state of flux. Some shippers have already felt the effects of the pandemic, while others are still bracing for impact. And with many cities going into lockdown and some businesses already closing their doors, finding capacity may soon be an issue, which will have a knock-on effect on carrier pricing.
While this crisis is still unfolding, there are steps shippers can take right away to protect their business from volatile and unsustainable costs—both now and in the future. This is unlikely to be the only period of uncertainty that your company will ever face, so it pays to be prepared for anything.
Here are a few steps you can take to avoid service disruption during times of crisis, without overpaying.
Check your contracts with suppliers and carriers—including clauses on carrier price contingencies.
In some cases, shippers may already be protected from price volatility by the strength of their contracts. They may have fixed pricing guarantees with specific carriers, ensuring they’ll continue to pay a consistent rate until at least the end of the contract year, unless the carrier goes under. Others may have a defined process in their contracts with suppliers concerning the management of surcharges.
Now is the time to dig out your contracts and confirm where your protections lie. When is the renewal date? And are there opportunities to ship more freight with contracted carriers?
Agree on rate-change processes with your logistics service providers.
During a crisis, shippers may also see some rate changes from their logistics service providers (LSPs). If the LSP is finding capacity for them, for example, and carrier rates are spiking, this will likely impact the LSP’s rate.
To ensure they’re maintaining strong relationships while protecting their bottom line, it’s important for shippers to work with their LSPs to develop an agreed-upon process for the shipper to confirm any rate changes. This process should include documenting the rationale behind the rate change to ensure clarity and transparency. The LSP should also provide both effective and end dates for any surcharges.
Establish internal validation processes for managing out-of-contract freight.
For any freight that is not covered by a contract, it’s vital that shippers have a defined process in place to manage these movements. Otherwise, a few rogue decisions could quickly add up.
Outline a robust methodology and internal validation process to cover these shipments, and share it with all staff and key external stakeholders to ensure they understand. Some higher rates are to be expected during a crisis, but keeping an eye on them is crucial to prevent them from getting out of control.
Leverage your transportation management system to find optimal carrier price quotes.
While a transportation management system (TMS) is designed to help shippers find optimal rates all year long, it’s especially valuable during a crisis. Using their TMS, shippers can open up bids to a larger pool of carriers, helping them offset any pricing swings to keep their costs in check.
That said, for business to continue as usual (more or less) during this crisis, employees will need to be able to access critical company systems from any location, not just from their workstation within your facility. Leveraging cloud-based TMS applications will be essential moving forward as more and more shippers are forced to ask employees to work from home for long stretches of time.
Guidance when navigating uncharted logistics territory:
At CTSI-Global, we’re monitoring the COVID-19 pandemic closely. We recognize that this situation is unprecedented, but over the course of more than 60 years in the logistics industry, we’ve dealt with crises before, and we’re here to offer our guidance and support to all the companies that partner with us.
Let us know how we can help. Contact CTSI-Global today.