The COVID-19 pandemic catapulted supply chain resilience to the top of mind for C-suites worldwide and into the mainstream news.
From 2020 through 2022, supply chain crises seemed to be a constant, from driver shortages to port backlogs to sky high spot rates. The shippers that made it through in one piece were those whose supply chains could roll with the punches and adapt to volatility.
What’s their secret? How have successful shippers built resilient supply chains that can withstand anything.
It turns out it’s not a secret at all — resilient supply chains across North America share some common traits, and you can strengthen yours by following several key steps.
What Is Supply Chain Resilience?
Supply chain resilience describes the ability of your supply chain to withstand disruptions and volatility in global markets for materials and transportation.
But when logistics professionals talk about building a resilient supply chain, they’re more often than not referring to stable and reliable transportation regardless of fluctuations in available capacity.
Think about everything that goes into ensuring a product is available on store shelves near you:
- Raw materials and parts must make their way to the facility where the product is assembled. This can occur entirely overseas, entirely domestically, or through importing materials and transporting them to domestic facilities.
- These products then need to be positioned for distribution either by moving to a distribution center owned by the producer or by the producer’s customers (retailers).
- The last leg of this journey is final mile delivery, either to purchasers’ homes or to stores where they may be bought.
Transportation capacity is required at every step of this journey from material to purchased product. When the truckload market becomes tight in the US — when there is less available capacity than there are shippers trying to purchase it — supply chain disruptions can occur.
What Are the Elements of a Resilient Supply Chain?
So what does a resilient supply chain look like?
Every supply chain is different, but successful ones tend to put some or all of the following practices and systems in place.
Primary & Backup Capacity
Your highest-value, most highest-traffic lanes should be your most reliable. Wherever you move the most freight, make sure you have a trustworthy primary provider contracted to it.
But even the most reliable carriers will decline primary tender from time to time (our original research indicates that shippers believe 90% primary tender acceptance should be the industry standard). When this happens, make sure your backup provider is ready to step in and pick up the load.
Durable Contract Rates
How do you keep your carriers reliable and happy? By ensuring they’re paid fairly for the service they provide.
If you run a transportation RFP (either annually or more frequently), keep in mind that the rates you negotiate will need to hold up until your next procurement event. If you don’t take projected market volatility into account when you set these rates, you could find your tender acceptance slips as market conditions change.
Effective Modal Mix
When the cyclical truckload market enters a tighter carrier’s market, shippers who rely too heavily on full truckload freight may find themselves facing elevated rates and limited capacity.
One way to proactively avoid this outcome is to diversify the modal mix in your supply chain. Converting truckload freight to intermodal is one cost-effective and efficient alternative, and if you have freight that makes sense to ship LTL you’ll likely find less volatility there as well.
Whether you procure capacity directly from carriers or rely on a third-party logistics provider (3PL) to source it for you, your supply chain’s strength comes from the knowledge that they’ll come through when it matters.
This is especially important for 3PLs as they can be valuable allies for both short-term capacity needs and long-term strategy. The right 3PL can not only be a crucial source of support when your primary capacity falters, they can leverage their experienced teams to help you understand your needs and optimize your network for cost savings and strong service across all modes.
How Do You Make Your Supply Chain More Resilient? 5 Steps to Follow
Resilient supply chains take careful planning, decisive action and constant monitoring to thrive. Here are five strategies you can put in place today to help your logistics team weather any market conditions.
Modernize Your Digital Strategy
Every other strategy on this list starts from here. It’s impossible to overstate the importance of collecting complete and consistent data, keeping it clean, analyzing it thoroughly and visualizing it in ways that lead to actionable insights.
So what does a modern data strategy look like for a resilient supply chain? It features:
- A transportation management system (TMS) that automates processes and keeps your data easily accessible.
- Cost and performance data consistently tracked (ideally this is automated through your TMS) and regularly reviewed for alignment with your KPIs.
- Open sharing of data with your providers and, potentially, even with other shippers to help eliminate waste across the entire supply chain.
- The willingness to take action on your data to support your strategic decisions.
Be Proactive in Procurement
A great way to make your supply chain more resilient is to make sure it runs into as few surprises as possible.
With a sound data strategy in place, you should be able to project your capacity needs with confidence, even to the point of anticipating seasonal surges. This in turn will help you get primary and backup capacity in place proactively for high value lanes, avoid gaps in coverage, and hopefully stay away form the spot market whenever possible — especially in a tight market.
Diversify Your Vendors
As in most walks of life, putting all your eggs in one basket is a major risk for your supply chain. This doesn’t just mean having primary and backup capacity for your truckload lanes — it can mean mixing up modes and providers as well.
If you can convert any of your truckload freight to either LTL or intermodal without sacrificing efficiency, you could find both cost savings and lessened volatility. And the more options you have generally across your supply chain, the more opportunities you’ll find to turn for short-term help when you need it.
Take Care of Your Carriers
The more that carriers want to work with you, the more likely they will be to accept your tendered freight, come through in a pinch or be flexible with your needs.
Try to become a shipper of choice with the carriers in your network by paying on time and in full, communicating with them clearly and frequently, and taking steps to improve the quality of life for their drivers. Small gestures like ensuring there’s a place to sit and a working bathroom at your facility can pay off big in the long run.
Tighten Up Your Ordering & Inventory Levels
One of the biggest issues many shippers found themselves facing in the wake of the pandemic was a precipitously high inventory to sales ratio. This is another area where strong historical data can help you avoid a shipping crisis.
You can help ensure the capacity you have available is sufficient to move your freight by avoiding unnecessary orders and moves. Model your orders throughout the year based on your historical need so that you’re ready when demand surges and not stuck with dwindling warehouse space when it’s flat.
Prepare for Any Market With the Coyote Curve
The best way to make your supply chain more resilient is to prepare for potential disruptions before they happen.
Find out where the market is headed in the coming months by reading our quarterly truckload market forecast, featuring the Coyote Curve® spot freight index.
We track spot rates, contract rates, and several supply and demand indicators so we can help you understand how rates are trending and how to set your supply chain for the coming conditions.