There are three immediate issues that you should focus on in 2022.
- Risk – can your supply chain withstand network disruptions
- Cost – what kind of cost pressures will manifest themselves during 2022
- Service – Can you provide/receive a reasonable level of service through your supply chain
Let’s look at each of these issues one by one and parse them into components that need attention over the next 12 months. Now is the time to be looking at, developing plans for, and executing a sound supply chain strategy in 2022.
SUPPLY CHAIN RISK
How breakable is the supply chain you employ to get product, raw materials, componentry, finished goods, from your vendor community? Do you have safeguards in place to remedy breakdowns in the “supply” chain? For example, if your supply chain has products that originate outside the domestic US, will you be able to get them either in the quantity needed, when needed, or at all for that matter? Do you have multiple supplier sources lined up to allow you to switch from one supplier to another seamlessly or are all your eggs in one basket for key product sources? There have been, up to this point, numerous embargoes, shutdowns, slowdowns, etc., that have impacted sources of supply. Covid-19 was a huge factor, and still is, in sourcing decisions. Put yourself in a position that allows you to flex with the network, not suffer from it. Have multiple sources of supply in multiple locations.
According to the FMC (the “Fed”) inflation was initially thought to be transitory. If you have been sourcing either products or services (such as transportation) you know that inflation is here to stay in 2022. Specifically, freight rates on all modes have been going up steadily, some at double digit rates. Although we know that this is not sustainable in the long term, it is a fact-of-life in 2022. Motor carrier rates have skyrocketed. Labor shortages, weather, input costs such as fuel, all have had a huge impact on and cause for increased rates. So, what can you do about it in 2022? Our advice is to get into long term contracts of a year or longer. Lock-in now at the best rates you can and keep them in place for as long as you can. Once again, variety will help you. Leveraging volume with few logistics suppliers is not a recommended strategy in today’s market. Keep your modal options as well as your individual relationships open to as many carriers as you can manage effectively.
Everyone seems to have gotten over the initial shock of having goods take much longer to get from point A to B these days. The recommended strategy for service going forward is two-pronged. Set realistic expectations with your customers. Make them aware of the challenges in the logistics network and let them know what you are doing to help mitigate the issues. One clear point is that you must have multiple options to move product because many logistics suppliers are simply under water. There is less capacity for more demand. This causes the network to go out of balance which in turn takes a long time to heal. The second prong of the strategy involves looking at options that you haven’t considered before. Dedicated capacity, Private carriage, Multiple-stop truckload vs LTL. Anything that allows you the ability to circumvent supplier issues is relevant in today’s marketplace. The more options the better. A third-party logistics company (3PL) can help provide more solutions.
Riverside Logistics. a twenty-five-year-old, third-party logistics company based in Richmond, Virginia, that prides itself on being able to handle logistics a myriad of challenges confronting its clientele. They have close to 1MM square feet of useable warehousing and participate in local, dedicated, and long-haul transportation markets. They also do Logistics Management Consulting with clients to improve the execution of their Logistics networks. We know that we can provide solutions that are both cost and service effective in today’s marketplace. Give us a call and we’ll be happy to try and help you.
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