Charting the Unknown: Freight Management in a VUCA Era

At least in my time, I believe the VUCA era for supply chain began when I was a Global Account Manager for Royale International in the time-critical services department. It was the first time in my career I witnessed one of the most severe supply chain disruptions caused by the infamous 2010 eruption of Eyjafjallajokull.

2010 Eyjafjallajokull eruption Source: Brittanica

Volcanic smog engulfed almost the entire continent and caused over 95,000 flights to be cancelled abruptly. Almost the entire European airspace was closed for days and I was scrambling to find alternate shipping solutions for my clients. Naturally, spot freight rates were surging and shipping was a torture for everyone back then.

Fast forward to the post-pandemic period when Cargobase was already established with its spot buy platform, many companies got affected far worse with global inflation at an all-time high, climate change, and geopolitical conflicts.

The VUCA era by now has become more prevalent than before.

To move forward and achieve the success we all seek as supply chain professionals, in my opinion, there are 5 facts we need to etch in our minds.

The new normal of supply chain is never normal, and so is freight management

Unless every global superpower is laser-focused on dealing with a common enemy, the current global political landscape is unlikely to change. In fact, it has already severely complicated supply chain management for quite a while. Even the topic of climate change amongst nations stirs debates rather than foster collaborative efforts towards tackling it.

Traditionally, supply chains benefit the most from peaceful mutual trade agreements which led to lower freight disruptions. But, it is never the case now especially when geopolitical tensions such as the US-China trade war are at an all-time high for the longest period of time. The repercussions have caused countless unprecedented disruptions, shifting trade patterns, and increased costs worldwide, which has also made freight management an even harder challenge for supply chain managers. According to Reuters, especially with the ongoing cross-strait troubles and chips conflict, the tensions will likely drag on.

Bear in mind, we haven’t even touched on the Russia-Ukraine War and COVID (or even another pandemic?)

In my opinion, most companies are still reactive to situations like these and there will always be a consequential price you would want to avoid paying: high operational costs. These are additional resources spent on additional manpower, inventory fluctuations, costly and inefficient expedited freight, etc.

According to the CSCMP State of Logistics Report, business logistics costs in the US alone is at a record high exceeding $2.3 trillion (vs. 2022 at $1.85 trillion) representing 9.1% of national GDP—the highest percentage of GDP ever. These numbers involve the costs incurred in fighting disruptions. Companies should adopt a proactive approach towards prevention by investing in building a resilient freight management system backed by processes that are as automated as possible.

The global climate will not “change” for the better anytime soon

Remember about what I mentioned about how the topic of climate change is still stirring up geopolitical debates? Antonio Guterres from the UN actually agreed we are all “failing to get a grip” on climate change because of it.

Though COP28 did reflect some progress, there was reportedly some controversial reporting on climate funds and a lack of a firm agreement on phasing out fossil fuels, which adds up to a disappointing event after all.

Source: news.un.org

Looking at the chart above obviously shows that we are not even close to seeing any significant progress in climate change. This would mean more disruptions to supply chains due to natural disasters which will then affect any mode of logistics transportation to smoothly deliver.

Source: ncei.noaa.gov

According to the chart above by National Centers for Environmental Information, 2023 is the year the United States has encountered the most natural disasters and with it, an all-time high rate of $600 billion worth of damages. We have not even looked at the rippling effects of the wildfires, hurricanes, floods, and earthquakes across other parts of the world.

Most aspects of climate change are beyond our control as freight management professionals and hopefully, the geopolitics of it can help create brighter days ahead. What we can grasp to help ourselves is embracing technology within transportation management systems (TMS), which should prepare us ahead of possible natural disasters, reveal better alternate routes with LSPs, and establish effective two-way communications during chaotic situations.

However, many TMS tools today are still held back by how complex their infrastructure is and this is why the next element is so crucial for freight management as well.

Transportation management systems have to adapt

Unfortunately, many transportation management systems today are still extremely complex by infrastructure, which is why they are very expensive, could take years to properly integrate into a company’s systems, and might not be able to deliver the agility expected in today's ever complex supply chains exacerbated by a VUCA atmosphere.

If any of these attributes sounds awfully familiar to you, we totally feel you.

In today’s volatile setting, trade wars, geopolitical conflicts, climate disruptions, and economic fluctuations are already a part of the new normal. Only a modern and agile TMS equipped with real-time visibility, data analytics and communications today can help supply chain managers navigate through disruptions quickly. Rigid and inflexible systems will likely stall operations and incur huge losses due to inefficiencies.

A volatile environment is also a perfect spawning ground for uncertainty. More than ever, companies deserve to be equipped with an adaptive TMS that can handle the most abrupt route changes, provide the most suitable modes of transportation options quickly, and calculate the best freight rates as soon as possible, to minimize risk and maximize opportunity.

While a TMS is fundamentally designed to enable companies to achieve efficient transportation management, TMS providers should also understand that the needs of companies vary across the board.

For small and medium enterprises, pricing and scalability is key. This is also one of the main reasons why cloud-based TMS are more popular as there are no hardware costs, and they are easier for developers to work on any feature or security updates, rendering them as more adaptive solutions.

As for larger enterprises, TMS solutions have to be extremely integration-friendly with 3rd party solutions (e.g 3PLs, carriers, ERP solutions, etc) and must be capable of supporting tasks involving regional regulation compliance as well as multilingual and multi-currency requirements.

In short, a well-developed TMS has to supplement the needs of the company, even if it means it has to be tailor-made in some ways. There needs to be more innovation in the providers’ space to develop more modern and effective transportation management systems. With more adoption of these, freight management processes will be a smoother journey for everyone.

Spot freight procurement tools will be more important than before

In a VUCA world, contract freight agreements will never be set in stone with shipments going smoothly on auto-pilot mode. According to Hans Hickler, President of Seko Logistics (Americas), he quoted: “You don’t know when you’re going to get knee-capped, but sooner or later [it happens]”

There will always be disruptions that will require companies to look for alternatives that can help transport their shipments to destinations on time, and it is always within these moments when seizing the most viable shipping options in the spot market is critical.

However, it can be challenging in a VUCA atmosphere as such situations would mean that there is a spike in demand within the spot market which will cause rates to rise. Your spot quotes could also take a longer time to be received and probably an even longer time to get a quote in return. If you are looking to get your quote across through a manual process and negotiate with emails or phone calls, chances are it will be increasingly difficult and time-consuming.

This is when a reliable spot freight procurement tool becomes essential.

A reliable spot freight procurement tool today should possess modern TMS attributes such as an expansive partner network of carriers, freight forwarders or LSPs, invoice matching capabilities and real-time visibility.

With a reliable spot freight procurement tool, companies can send out spot quotes to a vast network of carriers and effectively communicate with them to consolidate the best quotes. This will enable shippers to analyze carefully, make the best shipping decisions efficiently, and get their shipments delivered on time.

After all, the spot market is where shippers will find quick and reliable solutions when contract freight shipments cannot deliver, which will be gaining more traction in an increasingly VUCA setting.

In time to come, more shippers will find securing the best spot buy deals more challenging. Eventually, they will also feel that they are getting outpaced when more shippers invest in a modern spot freight procurement tool. Carriers will also be looking to join the spot freight procurement tool bandwagon as a partner to seize the spot market opportunities more efficiently as well.

Strategic partnerships and collaboration will be more important than before

In a VUCA environment, people tend to isolate themselves with a “self-sustainable” mentality by breaking away from partnerships or collaboration. This is likely caused by mental paradoxes driven by an atmosphere filled with heightened distrust, tension and competitiveness.

Personally, I believe unity is strength. Partnerships and collaborations are even more essential to gain leverage that will help all parties navigate through or even embrace VUCA. It could also help foster agility and adaptability, allowing all parties to respond swiftly to changing circumstances and capitalize on opportunities.

For freight management, this is absolutely applicable. Under the pressure of unpredictable disruptions and shifting market dynamics, siloed approaches tend to crumble. Hence, It is wise for shippers to seek out partners that can provide them enhanced supply chain visibility, network as well as risk mitigation capabilities that could cover their shipping needs in times of unprecedented disruption.

With any strategic partnerships or collaborations, all stakeholders should also leverage a transportation management system’s capability to establish a single source of real-time shipment data and facilitate end-to-end communication through messaging and document sharing. This is especially important for stakeholders who are working around suppliers of multiple tiers.

Every supply chain revolves around networks, which is also the reason why Cargobase’s TMS platform is built on the basis of collaboration. It is integration-friendly and already has an ever-evolving fleet of partner carriers available for shippers to work with. Today, we have over 800 carriers within our TMS partner carrier network to cover shippers’ contracts as well as spot freight shipments and we are definitely looking forward to reaching out for more.

Through such mutual cooperation initiatives, companies will also be able to exchange feedback that can help encourage continuous improvement and innovation that will help equip all parties with the capabilities to navigate through the VUCA landscape.

The Critical Mentality Shift in Freight Management

At times, it might be hard to embrace these elements. Like most people, I was also hesitant in recognizing these facts but a few important lessons throughout my professional career in the supply chain management space eventually changed my perception.

First, I learnt that nobody can control everything. Again, I’d like to emphasize that supply chain and freight management is a minefield full of unpredictability. Factors like geopolitics and climate change are beyond our control and we have to recognize it. Instead, we have to learn how to focus on the factors that we can control and only from there, we will be able to start looking at things with a little brighter perspective.

Second, change is inevitable. Even in an ever-evolving VUCA setting, the world is looking to innovate and at times, we have to let go of what we are most comfortable with in order to adapt. Resisting change is only going to delay or even worse, stop you from progressing. We have to embrace change as a natural part of life. Recognizing the importance of change is part of what drives Cargobase forward and we will not be where we are today without constantly looking to adapt our software to the market’s or clients’ requirements.

Third, I recognized that seeking support from my peers, fellow colleagues, and partners is never shameful. You could be having your own thoughts but perspectives from others could open insights you never knew it could have made so much sense. It is essential to recognize that we are never perfect and we can only truly succeed when you surround yourself with people that align with your directions. Along the way, we must also be sure to value those that chose to support you on your journey and always stay open for a casual conversation with them. Who knows it could spark a revolutionary idea.

The VUCA storm may rage on but if you need a helping hand, we are more than willing to raise out ours. Feel free to reach out to us to learn more about how Cargobase can navigate these uncharted waters and emerge stronger than ever with you.