Prior to the COVID-19 pandemic, supply chain operations were largely viewed as a cost center for organizations. Transporting goods and materials was understood to be a cost of doing business, but in many cases, the C-suite took little notice of it beyond a budgetary line item.
As e-tail giants, who fashioned themselves as logistics companies, began to change this, and as far back as 2018, many organizations began proactively putting more resources into supply chain planning to improve performance and minimize costs.
Savvy businesses began to forecast for winter storms, hurricanes, plant outages: any events that could negatively affect supply chain performance. The goal was to provide the finance department with a budget number with some flexibility built in that does not need to be constantly revised.
In March 2020, the pandemic kicked all of this into overdrive. The companies that thrived during this challenging time had built a logistics infrastructure that could expect the unexpected.
What your c-suite needs to know about logistics
Now that more executive eyes are on your logistics department, there are some key things they need to know to understand how costs fluctuate and how you set your strategy.
First, here are some long-term truisms that have guided supply chain professionals for years:
- There isn’t an endless supply of trucks. The truckload market is highly fragmented and volatile, and many factors can impact the capacity on the road at any given moment.
- The truck someone uses today, someone else will use tomorrow. The quicker we all get them moving from one shipper to the next, the healthier the logistics ecosystem for us all.
- The truckload market is both seasonal and cyclical. The rates you’ll see are impacted both by short-term surges and long-term fluctuations in supply and demand.
In the short term, these are some factors in the volatility we’re seeing in the industry today that your C-suite should be aware of:
- There’s an ongoing driver shortage. Labor shortages have arisen in the past, but this one has proven particularly difficult to shake due to the pandemic and to other sources of labor available for potential drivers in fields like infrastructure and construction.
- There’s a truck shortage too. While trucking companies have put in a record number of Class C truck orders, they’re delayed far longer than usual due to the microchip shortage affecting numerous industries.
- Direct-to-consumer sales have altered the landscape. The explosion of online purchasing we’ve seen throughout the pandemic has made companies rethink where their products and materials are going on the fly to keep up with new consumption patterns.
At the end of the day, your company leadership needs to know that logistics today is so much more than just moving trucks from point A to point B. It’s a complex network of real-time data sharing and constant communication that’s essential to not only any given company’s individual success but to the very health of the national and global economies.
Making your shipping dollars make sense to leadership
To me, the most important level-setting piece of information your company leadership needs to have about transportation is just how volatile and complex everything is, and why budgets need to be flexible.
Terminology is also a nuance you have to navigate with your executive team; terms you use regularly might be new to this audience. What is the difference between the spot market and dedicated freight, for instance? And why might you continue to “gamble” with spot freight rather than securing a dedicated contract to control costs?
Spot rates are still inflationary year over year in Q1 2022. While you understand this might mean carriers with the capacity to take on a dedicated contract simply may not want to at this point in time, your CFO doesn’t know that as innately as you do.
My advice: Master the art of conveying your budget as a story. Avoid the tendency to wade into the weeds immediately and help members of your leadership team understand how everything interrelates in a way that foregrounds concerns of their specific business functions.
- Rising costs at the facility level can affect the volume of freight you can ship. How would this impact fulfillment?
- What would the consequences for marketing be if prices always fluctuated with freight capacity on the road?
- What is Shipper of Choice status and how can it help control costs by improving tender acceptance with your primary freight carriers?
- How can adding head count in logistics or investing in new software tools help make logistics budget forecasting more predictable for the finance department?
Each of these questions has an answer that clearly resonates with the business goals of one or more departments within your organization. When you discuss them openly, your leadership team will begin to see logistics through your experienced eyes, to recognize the complex field you’ve long known it to be.
Never stop communicating
Education is an ongoing process that demands constant communication, even with an executive audience.
Regular meetings with interdepartmental stakeholders can help everyone stay comfortable with logistics concepts and facilitate their buy-in to your shipping strategy. Another option is to circulate news or supply chain industry press articles about current events that affect your organization across functions.
The more your C-suite can practice speaking the language of logistics, the more they’ll find your strategic approach relatable, digestible and sound. And when you all speak the same language, you’re that much closer to achieving your shared business goals.