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Transportation & Logistics

Why are Middle Markets companies so vulnerable to transportation cost increases?  

 

For the past decade, companies have gone to the transportation market and purchased transportation services on an as-needed basis. This transportation strategy worked well for most companies.  Demand and supply for these services were for the most part in balance. Fast-forward to present day, and demand is far greater than supply.

 

Transportation Infrastructure (People, Equipment, rail line capacity, interstate highway expansion and repair etc.) is insufficient to meet the current and future demand.  Because it is an infrastructure problem in the United States, it will take years to resolve.  
What does that mean for the Middle Market? Most Middle Market companies need to immediately change their transportation

strategy and processes to reduce costs and to ensure acceptable service levels.

At FortéONE, we have been helping middle market companies address their transportation service and cost challenges for almost two decades. In years past, transportation projects were priorities for a small portion of clients, but dramatic cost increases and service failures have moved transportation to the front burner. Controlling transportation costs and improving service levels are now priorities for the majority of our clients. 

The 2018 Transportation Crisis has multiple factors that

ibistrendsfor2019.png

have made spot buying ineffective, and how to handle it is not new to us.  Our transportation consultants have consistently improved carrier service levels by 5-10% and reduced transportationcosts by 10-15%.  In many cases, we have saved our clients millions of dollars annually.  

Industry Insights

Middle Market companies are experiencing transportation cost increases and transportation service issues. According to a leading Transportation Analyst, "spot rates in 2018 … are up 23% 2Q18-to-date and 28% year-to-date with higher freight turndowns, tight capacity, and higher utilization …" 

Is 2018 an aberration that will rectify itself in 2019, 2020, 2021? Based on Q1 2019 trends, freight rates will continue to increase in 2019 and beyond.

 

 A multi-year truck driver shortage, LTL embargoes, and insufficient number of railroad cars and crews will not be fully addressed for several years, so it appears that transportation rate increases will be a multi-year trend.

Recent Successes

Construction Materials Manufacturer
Transportation Modes:  TL, LTL, Intermodal
Total Annual Transportation Spend: $16MM
Annualized Savings: 22%
Initial Benefits: 120 days
Service Level Improvement: Yes


Lighting Fixture Manufacturer
Transportation Modes:  TL, LTL, Air
Total Annual Transportation Spend: $12MM
Annualized Savings: 20%
Initial Benefits: 150 days
Service Level Improvement: Yes

Specialty Chemical Manufacturer

Transportation Modes:  Rail, Bulk Tank, TL, LTL, Ocean

Total Annual Transportation Spend: $9MM

Annualized Savings18%

Initial Benefits150 days

Service Level Improvement: Yes

Framework for Success

We have created a Framework for Success in Transportation Management that allows us to reduce your transportation spend and improve your service levels in 90 to 150 days. Our advanced analytical capabilities, coupled with our deep understanding of transportation market conditions and pricing gained from working with clients throughout the United States and carriers worldwide, make the FortéONE approach a powerful tool for improving your costs and service levels.

If you are interested in learning more about how you can reduce your transportation costs and improve your transportation service, please contact us today.

Philip Franz

EVP, Practice Director-Supply Chain and Operations Consulting

p.franz@forteone.com

630-460-7445