In recent weeks, rapid shifts in trade priorities have created a highly volatile and dynamic freight environment. With constantly changing tariff policies creating uncertainty among manufacturers and shippers, more businesses have begun to front-load deliveries in an attempt to insulate themselves from paying higher duties on raw materials and finished goods, which is predicted to keep already inflated ocean rates increasing until tariffs are officially imposed.
Recent and imminent tariffs between long-time trusted partners could have a significant impact on the viability of frequent cross-border transactions and potentially drive a need to consolidate freight and/or reshore manufacturing.
Risk Mitigation Strategies
While the current situation is not disrupting supply chains in the same way the COVID-19 pandemic did five years ago, lessons and strategies learned during that time can still be applied to mitigate risk today.
Careful consideration should be given to inventory levels, safety stock and reliance on just-in-time replenishment methods. Inventory levels need to be resilient against strains in transportation capacity for materials sourced both domestically and abroad. In addition to inventory levels, shippers must be able to secure the capacity needed to guarantee on-time and in-full deliveries.
1. Build Robust Carrier Relationships
During periods of macroeconomic uncertainty, one of the safest ways to mitigate transportation costs is to build robust relationships with carriers. In instances where capacity is squeezed, carriers are more likely to issue tenders to long-time partners and recognize their existing contract rates. In a scenario where demand rapidly shifts away from ocean freight toward domestic transportation or vice versa, carrier relationship management is a necessary part of ensuring needed capacity and mitigating spend.
2. Carrier Contract Negotiation
enVista is experienced in helping our partners analyze their freight network and build strong relationships with their carriers. Locking in long-term contract rates with several carriers is an effective way to insulate against sudden drops in capacity and build redundancies across the supply chain.
3. Inbound Freight Conversion
As the market is expected to shift toward increased domestic production, ensuring that you have a robust inbound transportation strategy in place is essential to avoid increased costs in your transportation spend. Assessing whether your inbound volume would benefit from being brought under your management, determining what supplier freight would be most impactful to your OTR volume and introducing best-in-class industry standards into your supplier MSAs and contracts can help you weather a tumultuous freight market.
As the near-term economic landscape remains uncertain, U.S.-based manufacturers and shippers should once again be focused on their risk management techniques.
enVista is a trusted partner for shippers needing to reexamine their existing transportation plan and find ways to save on transportation costs. Our transportation consulting team has worked on award-winning projects that strengthened carrier relationships, stood up inbound freight management, optimized networks and facilitated transportation strategy planning. To get you started, leverage our free 30-minute consultation to begin assessing your network and identifying opportunities to bolster your transportation operations for resilience against uncertainty.
