Five Steps to Navigate the Driver Shortage with a Smart Supply Chain Strategy
The logistics industry is no stranger to challenges. From natural disasters to complex tax laws and the recent port strikes, obstacles are overcome every day to keep business moving. However, North America is currently facing an overwhelming shortage of truck drivers that is threatening to dramatically slow the pace of commerce. The American Trucking Association1 cites that there is a current shortage of approximately 35,000 drivers, and with no increases in drivers expected, that number will likely rise over the next decade2.
Pay rates for drivers are being forced up and those costs will be passed to shippers in higher freight rates and then on to consumers for the products being shipped. Put simply, shippers are trying to find carriers to haul their loads. Carriers do not have enough drivers to haul them, and are even using 3PL freight brokers to help haul their loads. Service is suffering on all fronts.
So what can organizations do to traverse this capacity crunch to keep business moving?
Here are five steps many of the world’s smartest organizations are taking to successfully navigate the shortage with transportation optimization technology.
Step 1: Establish a baseline model to visualize and assess your current end-to-end transportation network
Before selecting the right strategy to move forward, you first need to assess what is working and what is not with your current transportation network. By utilizing data that has been gathered even down to the individual SKU level, companies can build and view a living model of their current transportation network. A baseline model of the existing network provides a credible and detailed foundation for analyzing the possibility of cost cutting through cross- docking, fleet sizing, and sourcing reassignments.
Step 2: Consider alternate modes of transportation
Regardless of the logistical issue a vendor is facing, consumers still need their products. To overcome the limitations of a limited number of drivers available to move goods by truck, organizations may have to seek alternate modes of transportation. This can range from air, ocean or rail to alleviate the capacity concerns of ground transport.
Step 3: Assess inventory right-sizing and/or the use of private fleets
Another consideration is to evaluate right-sizing your inventory in order to meet desired service levels at the lowest possible cost. This can help address capacity concerns while posing the opportunity for millions in savings.
It is also worth considering utilizing private fleets as part of our transportation strategy. Fleet optimization allows businesses to maximize their resources by creating multi-stop routes, assessing direct shipment costs and determining the right fleet mix and size.
Step 4: Use modeling technology to run what-if scenarios to test various strategies before implementation
From the risk-free confines of your model you can test the impact of using alternate transportation modes or using private fleets, validated with your actual data, and assess the right approach for your business. This “test before implementation” environment allows organizations to make the most innovative and intelligent business decisions without having to test the theory in the real world. Additionally, being able to accurately analyze potential network configurations and predict performance makes it easier to garner executive support for a new strategy.
Step 5: Adopt transportation modeling as an ongoing business process
While using modeling on a project basis is helpful, to take the supply chain to the next level many leading organizations are adopting transportation optimization as an ongoing business process. This enables organizations to analyze the long- term view of their transportation network and historical trends. This also gives businesses access to living models for continuity planning and to mitigate risks for unplanned circumstances. A repeatable modeling process enables the team to have a strategy in place and be on the leading edge of adaptation to whichever circumstance does arise.
With new and more complex challenges impacting the industry every day, it is more important than ever for logistics professionals to utilize transportation optimization technology to design a smarter supply chain and gain the competitive advantage.
1. Reports, Trends & Statistics (American Trucking Associations), 2014 http://www.trucking.org/News_and_Information_Reports_Driver_Shortage.aspx
2. Expanding U.S. economy exposes rising truck driver shortage (Reuters), 2014 http://www.reuters.com/article/2014/10/02/usa-trucks-driver-shortage-idUSL2N0RO18P20141002