Kevin Brink
Vice President of Sales Operations
Kuehne+Nagel
Everyday life in the United States is dependent on the perpetual motion of “The Supply Chain.” This former military term has become a household name over the last 27 months and despite national coverage and a concerted effort by many to resolve its many complex challenges, solutions to existing and future constraints are hard to come by.
At its core, the supply chain is primarily comprised of one thing: people. They are supported by systems and various finite resources. However, if the people who do the actual work of making and moving things can’t keep up with demand, the ripple effects are felt for months or years – even if demand moderates.
While it may not be logical to think that a foodservice equipment and supplies (FE&S) distributor would be a competitor of, say, a pillow manufacturer, as shippers, everyone is contending for the people and transportation capacity (finite resource) that comprise the modern supply chain. Reviewing the current state of transportation can shine a light on why making your company attractive and easy to work with as a shipper is invaluable in this market and for the foreseeable future.
According to PIERS, July’s U.S. import volume from Asia was the ninth highest ever recorded, despite a downward trend compared to 2021 (a record year for imports). Demand may be softening compared to recent historic markers, but it is still well above pre-pandemic levels, which already had labor and capacity constraints. The same report showed that U.S. monthly imports topped 2.3 million containers in 21 of 24 months between August 2020 and July 2022. Before the pandemic, monthly imports only exceeded 2.3 million containers once, in October 2018. This high volume of imports deteriorated labor pools, chassis and rail availability significantly, leading to a trickle-down effect on Intermodal, truckload and less-than-truckload performance, capacity and pricing.
Speaking to over-the-road transportation, the freight Transportation Shipment Index (TSI), which measures month-to-month changes in freight hauled by transportation providers across several modes, rose 1.7 percent month-over-month in July. That increase marked an all-time high of 142.4, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS). The nation’s truck tonnage is still rising year-over-year, giving 2022 the potential to break 2021’s historic numbers. The sheer volume of freight taxes drivers, dock workers, dispatchers, equipment repair technicians, etc., not to mention the carrier networks and equipment itself. This compounds the backlog in imports as there aren’t enough people or pieces of equipment to haul the historic number of inland bound containers in a timely manner.
FE&S transportation needs are often different than other industries. The freight profile (commodities being shipped, service requirements and delivery sites) can deter transportation providers who are focusing on yield and building density in their network. That is why it is crucial for companies to focus on making freight more attractive. The freight profile won’t change; however, distributors can combat inflation through enhanced packaging/pallet building, digital product libraries with freight classes and meaningful discussions with providers not on price but on mutual solutions to lower everyone’s shipping cost. Of those three, digital freight product libraries are the most impactful to everyone as they are the basis for automation and cost-to-serve metrics.