In our previous post (Making the Sales Surge Connection), we explored transportation-related problems that can unseat special retailing events such as seasonal sales, promotions, and product launches. In this post we offer some suggestions for improving this critical link in the sales push supply chain.
Since a lack of communication is often at the heart of problems like these, one solution is to include transportation in the planning loop. This might sound obvious, but all too often freight management issues are overlooked during the preparatory stages of a sales event.
A regular email to service providers that gives estimates of expected volumes over the next 30 days can make a world of difference when planning for volume surges. We stress that these are estimates only; carriers should not – and usually don’t –expect cast iron guarantees that far out in the sales cycle. But even a rough idea of what capacity the shipper is likely to need in certain lanes enables providers to start thinking about where their assets should be positioned.
Another bonus of these early warning messages is that freight rate negotiations are often a lot easier and cheaper. Haggling over rates for surge shipments a few days before they are due to be delivered, is invariably a lot more expensive and stressful than starting these conversations well in advance of the peak season. This is particularly the case when you are shipping into locations where capacity is tight. You might be able to leverage relationships with core providers by negotiating favorable rates up front.
Carriers appreciate being included in this fashion, and are more likely to view you as a valued customer. Also, you are helping the providers to maximize fleet utilization by giving them advanced notice of peaks in demand.
Getting transportation involved early on also streamlines the planning process. Launching a product in Wisconsin during the third quarter is a tough freight management call, for instance, because you’re competing with other holiday pushes out of the Midwest. A better option might be to stage inventory, say, 200 miles away prior to the campaign and redistribute locally at the appointed time. This approach avoids shipping direct into a tight capacity area when rates are high and capacity is scarce.
There are a number of reasons why companies don’t communicate their sales push intentions to service providers to give them plenty of time to plan ahead. Perhaps managers are unsure about how their networks are changing, and hesitate to send out information that might not be 100% correct. Stating in an email that the shipment details enclosed are based on assumed, not guaranteed, volumes, helps to mitigate these fears.
Some shippers in volatile markets update providers in this way on a bi-monthly basis. When such reports are available, we definitely see an increase in truck availability.
In addition to more effective communications, surge shippers can increase the chances of success by making sure that their transportation management systems (TMS) are geared to these special events.
Percentage-based tendering is an example of a TMS feature that is invaluable in such situations. The system identifies how your volumes are allocated by carrier and lane, on given days, weeks, or months, and when a carrier hits its maximum the TMS will no longer tender freight to them.
Also, the TMS can be set up to give a percentage of the volume to different carriers in specific lanes. Maybe a key provider gets 30% of the freight and a handful of others that are lower in the route guide get 10%. Divvying up the volume in this way makes it easier to bring in lower-tier carriers when you need them to support a surge. They are already familiar with the business and have committed some assets to your shipments.
Advanced TMS solutions can create regions around sales pushes. If the Pacific Northwest is a target area, for example, that becomes a designated region and the TMS allocates freight to service providers that are active in that part of the country. Building these relationships smoothes the way for sales campaigns by, for example, encouraging the carriers to position trucks in that area.
The number of special or seasonal sales pushes in the retail industry continues to increase; witness how promotions were extended during the last Black Friday holiday event. It is more important than ever that shippers and service providers work together to manage these events more efficiently.