Managing Weather’s Impact on Transportation Capacity and Costs

by Mark Derks

March 4th, 2014

Empty shelves at the grocery store, higher priced retail items, just-in-time deliveries, and extra-long transit times are all becoming normal occurrences thanks to the inundation of recent winter storms. If your job involves transportation or the supply chain you’ve probably been impacted particularly hard—namely in the form of transportation delays and rising costs. These unexpected transportation changes this early in the year make satisfying customers and staying on budget particularly challenging.

Weather is one very unpredictable factor that can quickly affect transportation and drive an imbalance of supply and demand throughout the marketplace. Trucks, trains, and airplanes can’t navigate the massive influx of winter weather fast enough to support demand. Snow and ice make it impossible for planes to safely take off and land; trucks are slowed by congested, unplowed highways; and railroads can’t clear the tracks fast enough to get through. Like a domino effect, these delays lead to other, often costly, problems for supply chains.

Capacity constraints. As all types of equipment are finding it difficult to reach their destinations on time — especially in certain parts of the country — shippers have a more difficult time finding the capacity to move even their normal volumes.

Tight lead times. As volumes start to stack up, available lead time starts to decrease. Even with the best possible planning, winter conditions make it difficult to predict when conditions are good enough for your providers to get through. Research suggests that the more lead time you give when procuring transportation, the lower the costs. As weather impedes the ability to provide better lead time, costs go up.

Routing Guide Depth. Higher demand for weather-constrained capacity pushes carriers to reject loads at rates formerly agreed to during procurement events.  This leads to routing guide substitution as shippers go deeper into their routing guides and higher rates, which in turn raises overall transportation spend.

Accessorials. Truck orders not used, longer demurrage, deeper consumption of fuel, more pick-ups and stop-offs, etc. all increase during times of poor weather conditions. Higher accessorials means higher costs. Most budgets can handle these increases in a one-time weather event. However, ongoing weather events drive these costs deeper and deeper into the budget as time goes on and can have a real impact on total landed costs.

Inbound delays. These challenges also affect inbound transportation. Goods coming from areas affected by recent storms could be delayed due to facility shutdowns power outages. And that’s on top of any transportation capacity constraints.

Quality Service and Competitive Advantage. Regardless of any weather conditions, customers thrive and grow by supplying products and increasing sales. They expect freight to be delivered with a high quality of service through thick and thin. Only those with a strategy and plan, who can deliver through inclement weather conditions, truly have a competitive advantage in the marketplace.

So, the real question is, “As a shipper with customer commitments, what can I do in an environment like this?” First off, understand service providers will likely only pick up extra volumes at higher rates. As demand skyrockets, it may be more important to choose providers that deliver the level of service you expect to ensure your products arrive as they should, giving your customers a competitive advantage despite higher costs. Timing is critical when it comes to looking at your strategy. Look to reorganize and reprioritize freight flows and customer requirements as needed to adapt quickly to the current market. Ask yourself these questions:

1. Do you have consolidation opportunities that weren’t previously there or you wouldn’t normally take advantage of?
2. What types of transportation providers are you using? Do they have the ability to move additional freight volumes? Do they have the size and scale to help you weather the storm? Can they help you storm after storm after storm?
3. Can you restructure your freight and service strategy to take advantage of multimodal offerings to secure more capacity?
4. Is there a link between your inbound and outbound transportation strategy that wasn’t there before? Can providers delivering inbound raw materials supplement outbound transport needs?
5. Do you have other suppliers you can rely on temporarily that weren’t affected by storms?
6. Does your budget account for the unexpected? The unexpected that lasts for an extended period? How can you plan for the future?
7. Are you getting creative? Have you engaged others in your organization to brainstorm supply chain solutions? Marketing, customer service, business analytics, sales, IT, finance, engineering, etc., are all groups you may not think can help your supply chain, but put together creatively could yield some innovation for serving customers.

Questions like these can help you get into the mindset of making the best out of a flawed, extended situation. Re-evaluating your provider and carrier base can help ensure you have capacity in place that you trust to help you manage the next irrepressible circumstance.

The weather always plays a role in transportation.  Sometimes it allows for smooth sailing from origin to destination.  At other times, it has the power to stop everything in its tracks. Without taking a step back and revaluating your supply chain strategy now, you may end up being left out in the cold.

Mark Derks is currently director of global marketing for C.H. Robinson where he leads their marketing communications and brand management initiatives. His leadership responsibilities include marketing strategy, execution, and operations oversight for North America, South America, Europe, Asia, India and Australia. He has over 20 years of involvement in supply chain logistics and transportation.