One of the biggest challenges faced by supply chain professionals around the world, in light of the ongoing pandemic is its adverse effect on global freight rates. Owing to the fluctuations in supply and demand, securing reasonable freight rates has become even more difficult than before.
At the peak of the impact of coronavirus, there was an overhang of supply, i.e. excessive supply combined with very low demand. Logistics analysts predicted that both spot and contract rates would fall by a large margin in the first quarter of 2020, which is exactly what happened.
Things got better with the logistics industry adapting to COVID-19’s precautionary measures, and as a result, spot pricing and contract pricing gradually started increasing and stabilised.
While such uncertainty and fluctuations are common in the industry, it is always advisable to stay on top of your game and build a network that can weather through any adversity. With the right technology at hand, building supply chain resilience has become easier than ever before. Instead of relying on manual efforts for rate negotiations and paperwork for documentation, it is time to start adopting digital solutions for rate procurement where all the information is consolidated on a single platform.
How extensive was the impact of COVID on rate procurement?
The logistics and supply chain industry were initially hard hit due to the pandemic with the government imposing stringent measures, resulting in reduced transportation and labour. With no workers and no modes of transport to ship cargo, a huge scarcity ensued, which led to freight rates shooting up by 15-20%. Even with automated loading and unloading of cargo, workers are essential to perform some functions.
Transport companies’ associations predict that new demand for freight will remain low going forward, as industrial output is anticipated to be muted and warehouses too will continue to work below capacity.
This only leads to freight rates skyrocketing with freight demand dipping along with the global economy. The U.S. Commerce Department recorded the most significant drop ever in the second quarter of 2020, with GDP falling at an annualized rate of 32.9%.
The entire freight transportation industry is awash with disruptions and is quickly trying to come up with solutions to get freight to move in one way or another.
Procuring freight rates
Identifying who offers cost-effective freight rates as well as provides good service is crucial to your bottom line. Most shippers manage freight rates and strategic transportation sourcing with the help of simple tools like Excel spreadsheets. The spreadsheets can take days to become up-to-date and don’t provide much data to compare with the historical data.
Due to little or no availability of detailed data, it becomes very difficult for the carriers to determine the best rate to bid. This causes the carrier to either overbid on the discount, which would cause the carrier to come back a few months later with a rate increase, or it would cause the carrier to underbid the discount causing the shipper to pay too much.
Instead, you can turn these traditional rate procurement processes on their head and opt for an easy-to-use and transparent automated solution. Any freight rate procurement solution will be equipped with the capability to maintain all the transactional logs and historical data for quick comparisons as well as update rates in hours instead of days with the provided tools.
The trends ahead…
Easier rate management and collaborative transportation sourcing are the trends that you need to keep up with today. The shippers and carriers need to be synchronised where the shipper starts by leveraging the carrier’s rate base and has full visibility into which lanes a carrier operates most efficiently and at the lowest cost.
Automated freight procurement software provides the transparency required to remove bias and create stronger supplier and carrier relationships. It also enables you to make data-driven decisions as well as provide a better experience to your customers.
GoComet’s platform allows you to do everything possible under the sun, be it setting your own deadlines for procuring spot shipment rates from your vendors, recording every interaction in the bidding and selection process, and procuring the best rates for your business. GoComet enables you to secure the best deals through its automated, compounded negotiation system and drive double-digit savings each time that you ship.
To know more about rate procurement and how best to negotiate the best deals for your freight, talk to us today!