How to beat the high cost of shipping

This is an excerpt of the original article. It was written for the December 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

December 2021

Each December, the focus of the issue is our annual Executive Guide to Supply Chain Resources. This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. But, as with years past, we’re also featuring several articles we trust will give you something to think about in the coming year.

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These days, when the discussion changes from how much a shipment is going to cost (more) to whether it can be moved at all (maybe), it’s time to recognize that we are in uncharted territory. While the imbalance between shipper demand and shipping capacity won’t last forever, most shippers don’t believe they will see a remedy anytime soon; most expect that it may get worse before it gets better.

To make the most of a difficult situation, shippers will need to change their mindsets and separate their short-term and long-term decisions. In the short-term, the answer is to move away from a focus on the lowest total delivered cost to maximizing available capacity first, while making the perennial fight over costs with carriers a secondary consideration. Longer term, the answer is to design cost out of the system. This won’t be easy, as almost all of the critical long-term changes are out of the control of the transportation manager, and require company-wide decisions and company-wide approaches from procurement to sales to operations.

In the short-term, then, the best thing a shipper can do is become the best customer a carrier or broker ever had: Give them a good reason to give you their scarce capacity. Becoming a shipper of choice is not easy, especially in a crowded market where every shipper might have the same idea and providers appear to have the upper hand, but the approach should yield benefits not only now when demand is high and capacity is in short supply, but also longer-term when price is again an issue, and you have proven to be a good partner to do business with. And as many of the short-term changes lower carrier costs, you will have an opportunity to share in the benefits later when the market reverts to the norm.

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