What do you see as the big issue for 2019?
While organizations often execute decisions and strategies on cost-accounting of direct product costs (e.g.: raw materials; labor), the spot market full truckload (FTL) market has definitely caused volatility in 2018 forecasts and indirect costs. All indicators are that this volatility will continue into 2019. Continued strong freight demand – coupled with the electronic logging device mandate and lack of qualified drivers – creates the perfect storm for efficient made-to-order (MTO) deliveries in an environment of skyrocketing FTL spot prices. With such a rapid escalation of pricing, the effect of freight costs will play a larger role within the entire supply chain decision-making: from initial raw material purchase order to customer/consumer buying preferences.
What do you see on the horizon?
It’s still unclear if the FTL spot pricing market has hit a floor. With uncertainty in both domestic and global economic growth and trade war effects, FTL rates will continue to mimic volatility. However, risk mitigation strategies do exist for the savvy organization that takes a holistic approach to this major indirect cost. By taking the energy to analyze forecasting models and applying some basic queuing and Lean Principles, the logistics “horizon” becomes less volatile, uncertain, complex, and ambiguous (VUCA). More significantly, sharing these models and partnering with FTL (as well as less-than-truckload) carriers “smooths” the spot market and creates a new “long term” approach. Hence, mitigation through predictability and up-downstream information sharing – similar to what supply chains do for direct costs – provides a clear horizon for the introspective organization.
Ernie Litynski is Vice President-Operations for RBP Chemical Technology, Inc. where he leads the global supply chain. He has a B.S. Environmental Engineering from the United States Military Academy, as well as an MBA and M.S., Engineering Management (Marquette University) and M.S., Strategic Studies from the United States Army War College. As an Adjunct Professor, Ernie teaches Strategic Management and Supply Chain graduate-level courses. As a former General Electric Black Belt and Lean Six Sigma practitioner, he consults “pro gratis” for valued customers. Ernie has also recently been selected for promotion to Brigadier General in the U.S. Army Reserve.
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