Learn how SpendEdge can keep your supply chain healthy by managing risks and complying with safety standards, even with uncertainty in global border crossings.
Transportation Industry Overview
With regulations compelling companies in the transportation and transportation procurement sector to comply with newer safety standards, along with the emergence of sophisticated technologies, enterprises need to constantly procure advanced technologies that involve various supply chain risks. Focusing on helping transportation procurement clients gain a competitive edge, SpendEdge’s procurement market intelligence solutions help procurement managers stay updated on developments in the supply market and freight procurement sector make informed decisions. Our transportation services procurement experts also closely monitor trends in the supply market, supply-demand status, and supply chain dynamics and help clients mitigate inventory risks, while ensuring compliance with safety standards.
Freight and Logistics
In addition to the need to deliver instant delivery services, logistics service providers are also faced with the increasing demand for flexibility and visibility in transportation procurement. Since logistics providers serve customers with operations that are spread out across the globe, they need to effectively manage the supply chain and identify associated risks through transportation industry analysis. With an in-depth look at market conditions, SpendEdge’s transportation procurement market intelligence experts offer effective solutions that will help clients optimize their sourcing strategies and freight procurement to help them reduce operational costs.
From constant technological innovations to the changing demands of the consumer, transportation equipment manufacturers are constantly dealing with a number of short- and long-term sourcing and transportation procurement challenges. With a team of experienced category and commodity specialists with expertise across various industrial sectors, SpendEdge provides several procurement market intelligence services that help buyers identify appropriate supply markets and develop robust freight procurement strategies.
Being an industry completely driven by the preference of customers, the travel industry always needs to maintain a balance between offering competitive pricing and delivering brand experience. With frequently increasing labor and material costs, cost management is a key challenge for the industry. By identifying various cost elements and understanding the contribution of each cost element to the total cost structure, procurement market intelligence specialists at SpendEdge offer granular market- and category-specific insights that help clients make better purchasing decisions.
Direct and Indirect Spend Categories
Direct Materials and Equipment
- Hydraulic axle jacks
- Hydraulic tripod jacks
- Jacking control systems
- Towable platforms
- Truck mounted stairs
- Truck mounted platforms
- Docking systems
- Metals and alloys
- Loaders & transporters
- Towing tractors
- Machined parts
- Reactors and pressure vessels
Direct Materials and Equipment
- Heat exchangers, boilers, and cooling towers
- Hydraulic and mechanical pitch systems
- Electronic and electrical equipment
- Mechanical equipment and components
- Turbines, pumps, and compressors
- Electronic components
- Electrical components
- Material handling equipment
- Capital machinery and equipment
- Process automation and control equipment
- Waste management
- Packaging materials
- Facility management services
- Facility equipment and supplies
- Corporate services
- Professional services
- Travel and entertainment
- Telecom and networking
- IT services
- Office supplies and equipment
- Computers and peripherals
- Logistics and transportation
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COVID-19 Impact on Freight and Transportation Industries
The freight and transportation industry is punctuated with dampened demand from key buyer industries such as manufacturing and e-commerce. Effective government intervention may lead to a revival of the transportation sector within a medium-term period. This will directly depend on the revival of key buyer industries such as manufacturing, e-commerce and construction.
The global economy is in a state of paralysis as the novel coronavirus impact has forced countries to take extreme measures for the well-being of their citizens. The pandemic has exposed global value chains irrespective of industry, even as companies continue testing the resilience of their operations.
Procurement and Supply chain disruptions?
The distinct sub-segments of freight and transportation ecosystem will go through critical changes and disruptions in the short term. SpendEdge presents a quick dashboard that summarizes the impact on the industry so far and what to expect in the next 2-3 months.
Freight and Transportation Impact Analysis: Key Insights
- Due to the rapid spread of the coronavirus across the globe, there is an immense negative impact on the freight and warehousing industry because of the inherent bottlenecks within global goods supply chains.
- Temporary restrictions on civil transportation have created unprecedented uncertainties in the transportation sector. This has a direct negative impact on the freight and transportation industry, with fears of substantial job losses looming large within the industry.
- However, effective government intervention may lead to a revival of the transportation sector within a medium-term period. Also, revival of the transportation industry will directly depend on the revival of key buyer industries such as manufacturing, e-commerce, and construction.
- Buyers and suppliers within the transportation industry aim at working in a collaborative manner to overcome the worsening coronavirus impact on the freight and transportation industry.
- Key players within the transportation industry should prepare themselves to be able to provide emergency support to healthcare and government agencies in case of such requirements. These initiatives will also help them generate additional revenue streams during a period of economic downturn.
Freight and Transportation Demand-Supply Trends
The coronavirus impact on the freight and transportation industry is translating into a significant reduction of freight demand from all the key user sectors as well as reduced corporate travel demand. Such a shortfall has led to minimal usage of resources by transportation suppliers. This may lead to substantial layoffs of human resources by such suppliers to protect their financial stability.
Suppliers aim to work in a collaborative fashion with government agencies to solve the key macro-economic problems they are facing. Travel and transportation suppliers hope to receive financial aid from multiple government agencies to overcome the negative coronavirus impact on the freight and transportation industry.
Home/remote working norms adopted by corporates have resulted in a sharp demand decrease for commercial transportation services across most countries. The airline industry has been hit the worst due to global operations shutdowns. This will lead to major layoffs and cost optimization initiatives once operations resume. From a procurement standpoint, buyers need to arrive at forward contracts with suppliers to ensure normalization of supply after the COVID-19 crisis.
Freight and Logistics Sector
- Reductions in manufacturing, exports, and overall global commerce activities owing to the coronavirus impact have led to a fall in demand for freight and logistics-related services across multiple countries. Moreover, ocean freight service providers have taken measures to cancel services, especially for shipments originating from China. Consequently, buyers of Chinese shipments need to work on a near-shore procurement strategy to offset such supply disruptions.
- Ports and terminal services have functioned in a normal manner, albeit with substantial human resource safety measures in place. Port authorities have provided additional storage capacity to suppliers in case they need to dock inventory. This will relatively ease inventory handling costs for suppliers and consequently lead to a downward price push for buyers.
- Suppliers have actively formed coalition groups to collectively present to government agencies the macro-economic issues they are facing to the coronavirus impact. Consequently, charges such as those associated with detention and demurrage are being conditionally waived for suppliers.
Transportation and Equipment Sector
- Demand for the transportation sector has followed a downward curve due to the coronavirus. Consequently, transportation equipment buyers have adopted ad-hoc procurement strategies to protect themselves from the fall in demand, which will lead to substantial disruption within the transportation equipment supply chain.
- Commercial transportation equipment buyers have also reduced their demand by a substantial amount, which is leading to the closure of supplier production centers across the globe. This is creating a ripple effect on the supplier’s supply chain, leading to temporary layoffs of vendor employees.
- Certain buyers are focused on agile mobility solutions such as “protected” rides to assist various institutions such as governments during the COVID-19 crisis. This may lead to a revival in demand for transportation equipment from such buyers. From a procurement standpoint, such buyers need to ensure that suppliers have disinfected equipment before delivery (within buyer premises) to ensure a safe working environment for buyer employees.
- Transportation equipment suppliers have enhanced inbound materials visibility and have also focused on manufacturing scheduling flexibility to meet buyers’ ad-hoc demand requirements. Suppliers have also worked on route optimization strategies to ensure the delivery of equipment within buyer premises
- There has been a drastic reduction in travel-related services due to the economic shutdown across multiple countries, which is having a debilitating effect on the global economy. Corporate travel has decreased by 90% as major buyers focus on procuring alternative communication platforms such as telecommunication conference platforms to continue their business operations.
- Suppliers are hopeful for assistance from various government sectors to overcome the coronavirus impact on the freight and transportation industry. They are evaluating areas that require the most government assistance required to revive operations. Suppliers are hoping for financial stimulus within areas such as marketing and promotional campaigns.
- Suppliers are also bracing themselves to assist with emergency operations of governments through integration of tourism with national emergency mechanism and systems. Such steps will enable government agencies to procure basic services from such suppliers and will also provide additional revenue streams for suppliers
- Global travel organizations are partnering with health organizations to create a recovery strategy after the COVID-19 crisis. Major buyers should work in a collaborative manner to assist such agencies to evaluate and develop key risk mitigation and recovery strategies.
Risk Mitigation Activities to Address the Coronavirus Impact on the Freight and Transportation Industry
Uncertainties loom large and the will swing between extremes as the coronavirus impact makes its presence felt in the global economy. Executives around the world are examining their supply chains with a microscope to find risk elements. Companies that can proactively identify or anticipate the bottlenecks in their supply chains will be closer to finding solutions for supply chain risk mitigation. Note that these solutions will have to be extremely customized for the sector, location and government responses and it is impossible to develop a “one-size-fits-all” solution. Still, there are elements that are common to any resilient risk mitigation plan. We recommend a few of these below for immediate results.
Development of mutual risk-sharing strategy with suppliers
Buyers and suppliers should work in collaboration to identify issues associated with transportation activities. One of the major areas where buyers and suppliers can collaborate in an effective manner is in constantly monitoring new areas where quarantine measures are being deployed and identify alternate travel routes effectively.
Usage of transportation/warehouse optimization software by suppliers
Buyers should make use of transportation and warehouse optimization software to streamline the procurement process. Usage of such software will ensure that buyers and suppliers optimize delivery routes and reduce fuel-related costs. Warehouse optimization software will provide insights to buyers regarding space availability within warehouses, enabling buyers to plan transportation activities based on their ad-hoc, medium-term, and long-term requirements.
Develop relationship with vendors from countries that have a lower count of COVID-related cases or are still working in a relatively normal environment. However, buyers must also be aware of increased prices in these geographical regions due to increases in demand.
Holistic risk mitigation plan
It is not enough to only look at production centers: buyers must also evaluate the logistics-related risks associated with the delivery of essentials and develop a procurement strategy accordingly.
Buyers need to be up-to-date on global developments as well as country-specific trends. Lockdown situations can change suddenly in locations that are of importance from a supply chain perspective. Buyers also need to monitor emerging success case studies and learn
Revisiting contract terms
Supply chain disruptions have created logjams at cargo hubs and warehouse facilities. It is expected that shipments will remain stuck at various places for an unknown duration and massive delays will occur across the entire supply chain. It is imperative that software solutions being used for supply chain management, inventory, warehousing, and shipment tracking are updated regularly. Complete visibility and accurate communication in the supply chain are important to drawing alternative plans and minimizing the loss of shipments in transit.