3 Reasons Shippers Struggle to Manage Their Allocation
For BCOs, managing their allocation has always been a struggle due to the many variables that can result in shortfall and missing out on containers they contracted for. As explained by McKinsey & Company, the “ability to forecast demand and determine how to meet it has been further challenged by supply chains’ increasingly global scope. And supply-chain leaders haven’t done themselves any favors by clinging to manual systems and antiquated software.”
Many shippers have found it’s nearly impossible to track and manage their allocation efficiently today. However, the reason they struggle to manage their allocation is often due to inadequate workflows and booking rules, along with relying on the outdated legacy systems they use to manage it.
In this article, we’ll highlight three reasons shippers struggle to manage their allocation and how harmonized contract performance and forecasting can enable optimized allocation.
1. Shippers Lack Interconnectivity Across Systems
Many problems in logistics derive from poor communication and sharing of information across systems. In today’s digital world, there is a system for everything and each function. That works fine in simple, one- or two-person interactions, but the typical shipment may have dozens of touchpoints, scores of data triggers, and an endless supply of information associated with each shipment. This amounts to an inability to correctly connect your POs, forecasts, and carrier allocation.
For example, if a carrier sends a large CSV file with estimated sailings and rolled container statuses once or twice per week, that data still requires re-entry into another system, which is done via Excel in many cases. That can drain hours of manual work from your team, and also add the risk of error.
Even if the information is keyed in correctly, the overall forecast is still subject to the time delay between receiving data from carriers and forecasting your demand for capacity over the next week or more.
As such, your forecasts are constantly playing catch-up while using outdated data when today’s advanced systems can make things operate more efficiently and in near-real-time.
That disparity also exists within the use of Excel, individualized carrier technology or platforms, third-party technologies, and other systems.
Let’s say John Smith’s Building Materials tenders an FCL with Carrier A, and the one person managing the data transcription within Excel accidentally types the wrong carrier name or code.
As a result, the data becomes instantly unusable for forecasting, and the company is still on the hook for contracted capacity for Carrier A. Yet, the company cannot really see where its capacity should go due to the lack of connectivity between the system used to manage allocation with Carrier A and the use of Excel as an in-house solution.
Working with legacy technology like using Excel to manage space booked across carriers and shipments that need coverage only sets an organization up for failure. Relying on homegrown solutions like Excel for allocation management come with many more costs than simply copying and pasting data. How many labor hours go into managing it? How many labor hours go into maintaining the file and even more, how many people can reasonably collaborate on the file at the same time?
These questions inevitably mean that the use of spreadsheets is likely limited to a handful of people that may not be able to work together in tandem, resulting in relying on outdated information and incorrect contract utilization.
2. Data Is Static, Unorganized, or Simply Overwhelming
Managing data in Excel sounded great, 10 or 15 years ago. However, it’s simply inefficient, overwhelming, and risky in today’s age. By the time shippers and BCOs receive data, its value begins to decline. By the time they enter the data into spreadsheets and make a determination of their forecasted demand, the data is too old to have a meaningful impact.
Most shippers forecast allocation on a four-week cycle. Yes, that cycle might be extended during high-activity periods, such as the holiday shipping season, but updating the data weekly leaves massive room for error in managing contracts. Furthermore, this manual method of managing data carries the labor cost of transcription and updating.
Still, what’s the other part of the process that breaks down? To answer that question, shippers need to hone in on process standardization.
3. A Lack of Process Standardization Leads to Misallocated Freight
Today’s carriers have different contract terms, definitions for what things mean, and different penalty or cost structures. While service contracts help to set some standards, the simple reality is that carriers are separate entities, and their processes can vary widely. As a result, freight allocation problems can occur if the data provided by carriers is incompatible in its raw format or needs to be digitized before being organized within the shipper’s system.
There should be a process and path for handling any interaction and standardizing key metrics across your organization. Yes, each carrier may offer some notifications and event milestones, but without a single source of truth for managing those events, their value also declines. If the BCO doesn’t know what the notifications mean or how they’ll impact overall utilization per carrier, do they have any real value in the first place?
In turn, the back office becomes solely focused on putting out fires that arise, solving the crises of underutilization or overutilization of contracted capacity, and overspending on lanes where capacity was available but not ideal for the unique needs of the shipper.
Optimize Freight Allocation With Data-Driven Contract Performance and Allocation Management at NYSHEX
Freight allocation isn’t only for carriers. It’s a comprehensive part of freight management strategies, and shippers that maintain control over freight allocation can derive significant benefits. Proper allocation within a singular resource eliminates the bottleneck of having one person manage allocation, and it continues to add value by ensuring your whole team can see how all contracts are performing, where they’re headed, and which lanes or alternatives are ideal for any given shipment.
Request a demo today to learn how allocation management and contract performance with NYSHEX can positively impact your ROI.
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