With logistics costs soaring after the outbreak of the Covid pandemic, the effects are still being felt by businesses more than a year later. The complexity of relationships between businesses and their logistics carriers has seen many accept these hikes as part of the ‘new normal’. Others are still unaware of the exact surcharges they’re being subjected to.
Here we’ll look at the effects the pandemic has had on profit margins and detail a simple solution to combat these, build supply chain resilience and gain an immediate advantage over your competitors.
Rising freight charges and carrier surcharges
Let’s take a quick recap.
In pre-Covid times, around 50% of airfreight was carried on passenger flights. When flights were grounded in early 2020, too many carriers were competing for space on too few planes. Freight charges naturally rose.
In spring 2021, the grounding of the Ever Given and its 18,300 containers in the Suez Canal further contributed to rising costs. 400 vessels were delayed for six days, at an estimated cost of $60Bn in trade. When businesses were unable to move goods by their preferred sea route, they defaulted to air freight, causing costs to soar.
Carrier companies passed these additional costs in the form of surcharges. In turn, these were passed down the chain to consumers. Many businesses were unable to make a profit, as their shipping costs rose by as much as 30%.
In addition, many brands learned of these surcharges too late. Logistics invoices are not standardised from one carrier to the next, and add-ons were often included within freight charges, making them easy to miss. Some were also unaware of the potential for surcharge variants which ranged by as much as 100% between April and June 2020.
An answer to supply chain challenges
Given that pandemics don’t tend to happen every week, there’s been a tendency amongst many business leaders to view inflated freight costs and carrier surcharges as unavoidable damage from a situation that was impossible to predict. Yet not all businesses experienced the same losses.
Those with a flexible and adaptive carrier selection process were able to react to the enforced changes and continue running at optimum capacity, within the limits of the ‘new normal’. Such an agile approach helped these firms to overcome supply chain challenges caused by the pandemic.
By building a resilient supply chain, such companies are also equipped to deal with any event that disrupts the freight handling process. Like the current HGV driver shortage that has already brought the UK’s fuel market to its knees, and continues to threaten the availability of festive goods as retail’s ‘Golden Quarter’ approaches.
A simple solution to the profit margin threat is for companies to be able to switch carriers instantly. Doing this enables a business to avoid the highest surcharges (and, to select the carrier most likely to deliver each shipment on time). Below, we’ll look at how this logical response can work in practice.
How to reduce supply chain risk
Most businesses will regularly review their processes, including their carrier relationships, whether during an annual procurement event or on an ad hoc basis However, by the time a decision has been made to switch carriers, a business may have already lost huge sums in rising costs and hidden surcharges. A process that takes weeks, months or even a year to change is simply too slow.
In order for the process of switching carriers to be profitable, a business needs the ability to continually identify the best value, best performance logistics service provider and adapt immediately. This is only possible through automation and the use of artificial intelligence (AI).
Many businesses reject the notion of automated carrier switching, because it seems too complex and challenging to change their operational structure and processes, so sticking to one or two preferred suppliers seems preferable. Conventional business set-ups require an enormous overhaul to switch between one carrier contract and another. However, the solution in 2021 needn’t be as problematic as it sounds, and adopting the most logical approach can greatly reduce supply chain risk and improve supply chain resilience.
Carrier switching made easy
Imagine a means of carrier switching that enables the process to happen automatically, removing all of the headaches and hurdles that normally occur?
That’s just one of the advantages the 7bridges platform can offer, by connecting your business to a huge global ecosystem of carriers and logistics suppliers.
Using artificial intelligence (AI) technology and a vast global dataset; the best route, carrier and packaging is automatically selected for every shipment in real-time. It’s not possible for a human to decipher such huge amounts of carrier data instantaneously, but our AI-powered logistics platform can do so.
As a result, you’ll get the best deal for every order processed. Your shipments arrive without delay. Customers are happy. Your supply chain runs smoothly. And that continues, regardless of global pandemics or any other eventuality.
Even for technophobes, connecting your business to the 7bridges platform is simple, and can happen in a matter of weeks.
And the savings? With minimal upheaval to your existing processes, logistics costs are typically reduced by 30% in normal conditions, with savings maximised at times of upheaval. A return on investment (ROI) can be expected in as little as four weeks.
A simplified approach to supply chain management
Some may consider adding more tech to their already complex operations to be impractical. But the platform actually simplifies your existing set up by bringing all of your logistics data and processes together, in one place.
With a single interface, it’s much easier to gain visibility over your costs, processes and performance. Everyone in your business is able to access the information they need, whenever they need it. And there’s no great AI-takeover – the platform simply enables your team to fulfil their roles to the best of their ability.
Think of it as having a supply chain issue management team on board, only one that keeps going 24/7.
Our software also includes an in-depth analysis report, making all transactions transparent and accessible from the same place. And by delivering results in real time, it’ll help you make the best strategic decisions just when you need to.
Removing the complexities from carrier network relationships, the platform simplifies the process, reduces costs and offers a significant advantage over your competitors. Automating your carrier network is a significant leap towards business success and improved supply chain resilience.
7bridges’ whole ethos is to enable your business to keep running in any eventuality. To learn more, download our whitepaper here.
