Inflation in the United States is at 9.1%, the highest it has been since November of 1981. Sustained inflation leads to economic recession, of which we find ourselves right on the precipice. Whether you’re fresh out of university or a seasoned veteran of the workforce, inflation affects us all the same. This stands true for businesses as well, as operating in the face of economic hardship is no easy task. Firms encounter challenges that the individual does not, seeing that they must maintain efficient operation in lieu of the widespread consequences of inflation. However, in the face of impending complications, there are ways that shippers can combat difficult inflation obstacles and stray as far away from a personal recession as possible. It is important to note that freight is the backbone of many industries, and efficient function of the freight specific to an industry extends to the efficient function of said industry. Take building materials for example- if the supply chain inherent to construction is running healthily, odds are that the construction industry is seeing minimal obstruction. Subsequently, if the supply chain experiences complications, the flow and function of the construction industry is heavily impacted. Needless to say, healthy management of supply chains amidst a recession is crucial for all parties involved. What does this mean for the freight industry?

First, we have to understand what a freight recession entails, and what it looks like for carriers and shippers alike. For carriers, this involves diminishing tender rejection rates amidst declining volume. Less freight demand drives down the price of shipments, which cuts into margins and renders portions of their fleet as obsolete. On the other hand, shippers face lowering demand, which slashes both the amount of goods sold and the principle issue of inventory surplus. On one side, you have shippers bleeding profit due to lower sales figures and costly inventory. Simultaneously, we see carriers attempting to tread water amid dwindling volume and lower freight rates when they are able to secure work. With this in mind, how can firms minimize the impact of a recession?

The importance of a business’ proactive capabilities in the face of complications cannot be overstated. This is a fixture of successful firms, specifically in instances short-term obstacles. What this proactivity fails to resolve is long-term roadblocks, where a bandaid fix won’t sustain the longevity of the complication. Firms can’t necessarily anticipate precisely what facets of their supply chain will suffer most. What can help combat this notion is developing a relationship with a third-party logistics firm and outsourcing critical tasks that pertain to your supply chain. Ranging from visibility concerns and load management to delivery support and shipment management, 3PLs provide efficient administration of multiple elements of your supply chain. This not only takes a load off the shoulders of shippers who struggle to stay on top of market trends and how their industry is affected, but supplies them with more intricate context and a much more coherent plan of action for complications to come. 

Along with 3PL collaboration, another leg to stand on in the face of recession would be digitizing your supply chain. Technological advancement is trending upward in every industry, and freight is no exception. The best advantages and slightest of edges are associated with the capability of using technology to enhance your operation. For a shipper or carrier, this can look like a comprehensive rating system that ensures you are paying fair prices on your freight. A digital grid of all your shipments across the nation heavily increases visibility of your freight, which can curb issues stemming from the inability to track freight in real time. Strong channels of communication are heavily reliant on technology, whether through your phone, email, or a personal digital delivery hub. Transparency in your supply chain combined with strong avenues of communication are absolutely paramount in the freight industry.

At the end of the day, there are certain hurdles that cannot be mounted. A nationwide recession, unfortunately, bears some semblance of negative impact for both citizens and businesses alike. However, through proactive effort to combat certain issues likely to arise will not only provide businesses with the ability to avoid these issues, but strengthen your response and bolster your supply chain in the long-term. 

https://www.linkedin.com/pulse/how-businesses-can-avoid-pitfalls-recession-rising-/